How To Create and Manage Lava Loans

Shehzan Maredia

Lava Loans allow you to borrow against your bitcoin in the most secure way possible, all without giving up self-custody. Lava Loans happen instantly and don’t require any paperwork, credit checks, or centralized intermediaries.

This guide walks you through how to create a loan on Lava, manage it, and understand the key actions you need to take along the way. If you’re looking for a broader overview of how Lava Loans work behind the scenes, check out our in-depth explainer here.

Creating a Loan

Initiating a loan is simple and takes less than a minute.

Start by clicking “Initiate Loan” on the home screen. Enter the amount you’d like to borrow in dollars. Select your loan duration (up to one year), and your loan terms will auto-populate based on your borrow amount and loan duration.

Click “Continue,” and you’ll see a detailed breakdown of your loan terms. Tap the green info icons next to “Liquidation Price” and “Monthly Required Payments” to learn more about collateral ratios, how monthly payments are calculated, and when monthly payments are due.

Once you have reviewed the terms, click “Initiate Loan,” and you’ll receive your loan capital in minutes. You can borrow as long as you have enough bitcoin in your vault. If your collateral isn’t confirmed yet on the network, you may see an error — just wait a few minutes and try again.

Managing a Loan

Once your loan is active, you’ll see it front and center in the “Active Loans” section of your home screen. Select the loan to view all of your loan details, including time remaining, payments schedule, liquidation price, and more.

Verify Your Collateral

Lava is the only product on the market that allows you to verify that your collateral is held on-chain, is not being rehypothecated, and is fully under your control. We provide cryptographic, not just legal or reputational assurances, that your collateral is safe.

You can verify this yourself by clicking “View My Collateral on Bitcoin Network” on the loan details page. Click the link, and you’ll be taken to a block explorer that allows you to view your collateral on-chain.

Use Your Loan Capital

Your loan capital will initially be transferred to your Lava Vault in the form of digital dollars. From there, Lava offers multiple options to spend, send, or off-ramp directly to your bank account.

Lava’s upcoming card offering will allow you to spend directly from your Lava Vault using a debit card that pulls from your dollar balance in the Vault.
You can offramp your dollars to your bank account using same-day ACH, regular ACH or wire transfer (note that this feature is currently unavailable in New York and Alaska).
You can swap dollars to USDC directly in your Lava Vault and transfer them to another account (no restrictions apply).

Make a Loan Payment

You can make payments on your loan directly within your Lava Vault. Click “Make a Payment,” select your payment amount, and confirm.

You can pay your minimum monthly payment, repay the entire loan, or choose a specific amount to pay in order to manage your loan. On Lava, there are no penalties for early loan repayment. Your payments will always cover the accrued monthly interest first, with any remaining funds applies towards reducing the principal balance.

Missed payments can result in partial liquidation, so it’s important to pay on time. Lava will send you notifications ahead of required payments.

Add More Dollars

In order to make payments, you’ll need dollars in your Lava Vault. You can add more dollars to your vault in one of two ways: via bank transfer, or on-chain transfer. Soon Lava will also offer the ability to redirect a portion of your payroll and automatically get paid to Lava.

To transfer dollars to your Lava Vault via bank transfer, select “Add Dollars” and then “Transfer from Bank.” You can use the details of that virtual bank account to transfer money from your bank account into your Lava Vault.

Note that bank transfers can take several days to clear, so it’s important to plan ahead of payment due dates.

To transfer dollars to your Lava Vault via on-chain transfer, select “Add Dollars” and then “Receive Dollars.” This will create a deposit address that allows you to transfer digital dollars (USDC or LavaUSD) over the Solana Network. These transfers clear nearly instantly and are the fastest way to get dollars into your Lava Vault. To learn more about Lava’s use of digital dollars and our selection of which networks to support, see this blog post.

Extend Your Loan

Lava offers the option to extend your loan, but only before the loan due date. To extend your loan, click “Extend” in the top right corner of the loan information page. You’ll see the terms of your loan extension, including the extension fee and any changes in the interest rate. Once you’ve reviewed the terms, click “Extend Loan” to confirm.

Monthly Payments and Loan Repayments

It’s very important to note that loans longer than 1 month in duration require monthly payments to manage interest. If you fail to make these payments, your loan will be liquidated. Lava will send you multiple reminders ahead of when payments are due, and you can see your payments schedule within your Lava Vault.

Both monthly payments and repayments of the full loan amount can be made directly within your Lava Vault, as shown above.

When you repay your loan in full, your collateral will be returned to you in full automatically.

FAQ

What is the maximum loan amount I can take?

There is no set maximum loan amount. However, if you run into any issues during the process you can contact us at concierge@lava.xyz

What happens if my collateral drops in value?

If the value of your bitcoin drops and your loan reaches a 95% loan-to-value (LTV) ratio, your collateral will be liquidated to cover the loan. You can avoid this by adding more collateral or paying off a portion of your loan in advance.

Why can’t I click the “Repay” button?

Make sure your LavaUSD balance covers the amount you select to pay. You may need to add more dollars to your account if not. If you still can’t click the button, contact us.