Yes, it looks very good on paper: Keep your bitcoin and get fiat to buy a house for example. But...
- You lose complete ownership on your BTC. What prevents some companies with funny names ("YouHodler" - seriously! - ) and created only 2 years ago to escape with your BTC?
- the LTV (the amount of BTC you need to put as collateral) is usually 100% of the loan!
- AND you pay also interest rate on that: So the lender gets your bitcoins (that he can borrow to others) + the interest rate that you gave him!
- Not to mention that if the price of Bitcoin decreases, you have to increase the amount of BTC put as collateral.
Imagine taking a loan and each month the lender asks you for your month salary and alters your loan if he detected that your salary has decreased (even if you pay the interest rate correctly)!
Bitcoin-backed loans are really insane and they make no sense at all!
I guess that's because there is not enough competition on this market for the moment but I don't understand how someone with a sane mind can purchase this for a start.
This really is a bad deal, not only because Bitcoin's price can be volatile but also because you as a consumer is losing at everything in this. The only favourable condition for you is if the price of bitcoin increases and you are able to clear off the loan with just some part of your total holding of bitcoin other than that all the situations are really losing for a borrower, you are right these loans really a rip off.