By Arch Lending·

Ethereum-Backed Loans: How to Borrow Against ETH Without Selling

Rate Disclaimer: Rates and terms in this article reflect February 2026 market conditions and may change. Visit each platform’s website for current rates and eligibility. This article is educational and does not constitute financial advice.

Introduction

The crypto market has evolved dramatically, but one problem remains constant: holders face a painful choice. Sell your Ethereum to access liquidity and trigger a taxable event, or hold through price volatility without accessing the value locked in your ETH.

Ethereum-backed loans offer a third path—borrow against your ETH and keep your position intact. But the landscape is fragmented. Many crypto lenders focus exclusively on Bitcoin, treating Ethereum as an afterthought.

This guide explains how Ethereum-backed loans work, when they make sense, and which platforms actually accept ETH as collateral in 2026.

Why Ethereum-Backed Loans Matter

The ETH Holder’s Dilemma

Ethereum sits at a unique position in crypto. Unlike Bitcoin—primarily a store of value—ETH has utility. You can:

  • Stake it for yield (typically 2–4% annually)
  • Use it as collateral on DeFi platforms
  • Hold it as inflation protection

But all these strategies fall apart when you need cash. Selling means:

  • Tax consequences: Triggering capital gains tax (short-term or long-term depending on hold time)
  • Opportunity cost: Missing future upside if ETH appreciates
  • Market timing risk: Selling at the wrong time (bottom of a dip)

An Ethereum-backed loan sidesteps all three problems.

The Market Opportunity

While Ethereum lending has expanded, many of the largest crypto lenders still don’t accept ETH as collateral:

  • Ledn: Bitcoin only
  • Strike: Bitcoin only
  • Unchained: Bitcoin only (and business loans only since January 2024)

Platforms that do accept ETH include Arch Lending, Figure, and Lava—though terms and rates vary significantly. For ETH holders who’ve been limited to Bitcoin-only lenders, there are now real options.

How Ethereum-Backed Loans Work

The Basic Mechanics

Here’s how an Ethereum-backed loan typically works:

  1. Deposit collateral: You send your ETH to the lender’s custody
  2. Get appraised: The lender determines your LTV ratio (see below)
  3. Borrow stablecoins or fiat: You receive USDC, USDT, or USD depending on the platform
  4. Make payments: You repay the principal + interest monthly or at maturity
  5. Recover collateral: Once paid off, you receive your ETH back

Loan-to-Value (LTV) Ratios Explained

LTV is the most important number in a crypto loan. It’s the percentage of your collateral you can borrow against.

Example:

  • You deposit 10 ETH worth $30,000 (at $3,000/ETH)
  • At 50% LTV, you can borrow: $30,000 × 0.50 = $15,000

The LTV ratio protects the lender. If ETH drops significantly, the lender may trigger liquidation to recover their funds.

Key takeaway: Higher LTV means more borrowing power but higher liquidation risk. Lower LTV means less capital efficiency but more safety.

LTV ratios for Ethereum typically range from 50–75% depending on the platform. Higher-volatility assets generally receive lower LTVs than Bitcoin.

Interest Rates and Terms

Ethereum loan rates typically fall between 8–15% APR, depending on:

  • Loan size: Larger loans often qualify for lower rates
  • Loan term: Duration impacts pricing structure
  • Market conditions: When crypto is hot, demand for loans rises and so do rates
  • Collateral quality: Bitcoin typically gets slightly lower rates than Ethereum

Arch Lending offers tiered rates based on loan size, with APRs as low as 7.25% for larger loans. Origination fees are also tiered, ranging from 0.49% to 1.49% by loan size and factored into the APR.

Custody and Security

Your ETH must be held somewhere during the loan. Most crypto lenders use one of two models:

Dedicated custody providers (recommended):

  • Anchorage Digital (used by Arch Lending)
  • Qualified custodians (used by Figure)

These are specialized firms with insurance, regulatory compliance, and audit trails.

Lender’s own wallets (higher risk):

  • Some platforms hold your collateral in their own infrastructure
  • This is cheaper but creates counterparty risk
  • If the platform gets hacked, your collateral is at risk

Arch Lending advantage: Uses Anchorage Digital custody (not their own infrastructure) and maintains a no-rehypothecation policy—your ETH isn’t lent out or used for other purposes.

Why Borrow Against ETH Instead of Selling

Tax Efficiency

Selling Ethereum triggers immediate tax consequences. Borrowing doesn’t.

Example: A $50,000 liquidation event

Scenario 1: Sell ETH

  • You sell ~17 ETH at $3,000
  • If you bought at $1,500, your gain is ~$25,000
  • Long-term capital gains tax (23.8% federal + state): ~$6,000 owed
  • Net cash after taxes: ~$44,000

Scenario 2: Borrow against ETH

  • You deposit ~17 ETH as collateral
  • Borrow $25,000 against it (at 50% LTV)
  • Pay ~10–12% APR depending on loan size
  • No immediate tax consequence
  • You still own the 17 ETH (which may appreciate)

The tax efficiency makes sense if you believe ETH will maintain or increase in value. If you think ETH will crash, selling might be smarter.

Keep Your Staking Rewards

If you’re staking ETH, borrowing against unstaked ETH preserves your staking yield on the remaining position.

  • Ethereum staking yield: ~3–4% APY currently
  • Borrow costs: Vary by platform and loan size
  • Your staked ETH continues compounding while you access liquidity from unstaked ETH

Preserve Optionality

Selling is final. Borrowing is temporary.

If you sell ETH and the price drops 40%, you can’t go back in time. But if you borrow:

  • You can repay whenever you want
  • You keep the collateral and any upside
  • You have true optionality

Ethereum-Backed Loan Platforms Comparison

Here’s an honest breakdown of platforms accepting Ethereum as collateral in 2026:

Arch Lending

Rates: APR as low as 7.25%, tiered by loan size (see rate table below) Origination fee: Tiered, 0.49%–1.49% by loan size (included in APR) LTV: Up to 60% (varies by collateral type) Custody: Anchorage Digital Rehypothecation: No Loan terms: Up to 12 months, rollover available Minimum: $5,000 Collateral: BTC, ETH, SOL, XRP Regulatory: NMLS #2637200, licensed in 44 U.S. states Credit check: Not required

Arch Rate Tiers (Bitcoin Standard Loan — ETH rates similar):

Loan Size

Interest Rate

Origination Fee

APR

< $250K

9.00%

1.49%

10.49%

$250K–$750K

8.50%

1.49%

9.99%

$750K–$2M

8.00%

0.99%

8.99%

$2M–$5M

7.75%

0.49%

8.24%

$5M+

—

—

From 7.25% APR (Reach out for quote)

Pros:

  • Multi-collateral (BTC, ETH, SOL, XRP) — one of the few platforms accepting all four
  • Professional custody (Anchorage Digital, not proprietary)
  • Low minimum ($5,000)
  • No credit score required
  • No rehypothecation
  • Regulated (NMLS licensed, 44 states)

Cons:

  • Tiered origination fee (0.49%–1.49% by loan size) adds to cost
  • Rates at smaller loan sizes are higher than some competitors
  • Relatively new platform

Best for: ETH holders who value professional custody, multi-collateral flexibility, and transparent tiered pricing. Especially competitive for loans above $750K.

Figure Technologies

Rates: 8.91% interest (9.999% APR at 50% LTV) LTV: 50%–75% Custody: Qualified custodian (Figure’s platform) Collateral: BTC, ETH, SOL Rehypothecation: No Loan terms: Varies Min/Max: Varies by collateral

Pros:

  • Competitive rates (9.999% APR is strong for mid-sized loans)
  • Up to 75% LTV (highest in the market)
  • Accepts BTC, ETH, and SOL
  • No rehypothecation

Cons:

  • Less transparent rate card for different loan sizes
  • Newer lending product
  • Insurance details not fully disclosed

Best for: Borrowers who want higher LTV (up to 75%) and competitive rates. Strong option for mid-sized ETH loans.

Lava

Rates: 5.0% (1-month) escalating to 11.5% (12-month) LTV: 50% Custody: Self-custody / non-custodial Collateral: BTC and ETH Loan terms: 1–12 months Min/Max: $100 minimum

Pros:

  • Lowest rates on short-term loans (5.0% for 1-month)
  • Lowest minimum ($100)
  • Flexible terms
  • Also offers BLOC revolving credit line (5% + 2% annual capital charge)

Cons:

  • Rates escalate dramatically for longer terms (5.0% → 11.5%)
  • Lower LTV (50%)
  • Self-custody approach
  • Less institutional infrastructure

Best for: Borrowers needing short-term liquidity (30–90 days) at the lowest possible cost.

Others

  • Ledn: BTC only — does not accept ETH. Strong for Bitcoin borrowers (10.4% interest + 2% origination = 12.4% APR for Standard loans; 2% fee waived in US/Canada).
  • Strike: BTC only — starting at 9.5% APR with zero origination fees. Does not accept ETH.
  • Unchained: BTC only, business loans only since January 2024 — 14–15% interest + 1.25–1.50% origination. Multisig custody model. Does not accept ETH for consumer loans.

Rate Comparison Table (ETH Loans)

Platform

ETH Rate (12-mo)

Origination Fee

Effective APR

LTV

Min

Arch Lending

9.00% (<$250K loan)

1.49%

10.49%

Up to 60%

$5K

Arch Lending

8.00% ($750K–$2M loan)

0.99%

8.99%

Up to 60%

$750K

Figure

8.91%

Included

~10.0%

50–75%

Varies

Lava

11.5% (12-mo term)

None

11.5%

50%

$100

For short-term ETH loans (1–3 months), Lava offers the lowest rates starting at 5%.

For mid-sized ETH loans ($5K–$500K), Figure’s ~10% APR is competitive.

For larger ETH loans ($750K+), Arch becomes increasingly competitive as rates drop through tiers, reaching 7.25% APR for $5M+ loans.

Risks and Considerations

Liquidation Risk

This is the biggest risk to understand. Your ETH is liquidated if its value drops below the lender’s LTV threshold.

Example:

  • You deposit 20 ETH worth $60,000
  • At 50% LTV, you borrow $30,000
  • ETH drops 40% to $1,800/ETH
  • Your collateral is now worth $36,000
  • Your effective LTV is now 83% ($30,000 / $36,000)
  • Liquidation is likely triggered

How to avoid liquidation:

  • Borrow conservatively — don’t max out your LTV
  • Keep a 20%+ buffer for price drops
  • Monitor collateral value regularly
  • Set price alerts at key levels

Note: Arch Lending charges a 2.5% liquidation fee if your collateral is liquidated.

Ethereum Volatility

Ethereum is more volatile than Bitcoin. A 20% price drop in a day is possible during market stress.

  • In 2022, ETH dropped 70% from peak to trough
  • This volatility can trigger unwanted liquidations if you borrow near LTV maximums

Mitigation: Borrow at conservative LTV levels (30–40% instead of the maximum).

Interest Rate Risk

Fixed-rate loans protect you from rate increases during the loan term. Variable-rate loans (offered by some platforms) can jump unexpectedly.

Always confirm whether your rate is:

  • Fixed (locked for the loan term)
  • Variable (resets monthly or quarterly)
  • Step-up (increases over time, like Lava’s structure)

Arch Lending offers fixed rates for the loan term, which is advantageous in a rising-rate environment.

Smart Contract Risk (For DeFi Lenders)

If you use a decentralized lending platform instead of a custodial lender:

  • Smart contracts can have bugs
  • Flash loans and other attacks are possible
  • You’re responsible for your own security

Custodial lenders like Arch eliminate this—you’re trading convenience for some counterparty risk (that the lender is solvent and honest).

The Tax Situation: What You Should Know

Important: This is not tax advice. Consult a CPA before proceeding.

Interest Payments

Interest you pay on a crypto-backed loan is:

  • Not tax-deductible for personal use (in most U.S. cases)
  • Could be deductible if you’re borrowing for business/investment purposes
  • Different in other countries (research your jurisdiction)

Repayment

Repaying your loan is not a taxable event—it’s just transferring value back to the lender.

Collateral Loss

If your ETH is liquidated due to price drops, you typically realize a loss on the ETH when it’s sold by the lender. Tax treatment varies depending on whether the loan was for personal or investment purposes.

State-by-State Differences

Different U.S. states (and countries) treat crypto loans differently. Arch Lending is licensed in 44 states—check your state’s availability on their website.

When Ethereum-Backed Loans Make Sense

Good Use Cases

✅ You believe ETH will appreciate in the next 1–2 years

  • You don’t want to sell and miss upside
  • Borrowing preserves optionality

✅ You need liquidity for life events

  • Emergency fund, home down payment, business capital

✅ You’re earning staking rewards on other ETH

  • Staking yield partially offsets borrow cost

✅ You want to avoid capital gains taxes

  • Borrowing defers the taxable event indefinitely

When NOT to Use Ethereum Loans

❌ You think ETH will crash — liquidation risk is too high

❌ You have no plan to repay — the lender will liquidate your collateral

❌ You’re borrowing at max LTV — any significant price drop triggers liquidation

❌ You need a very small loan — for amounts under $1,000, a personal loan or credit card may be simpler

Step-by-Step: How to Get an Ethereum Loan

Step 1: Choose a Platform

Compare based on:

  • Rate: Consider your loan size — larger loans get better rates at Arch; Figure is competitive for mid-sized loans
  • LTV: Figure offers up to 75%; Arch offers up to 60%
  • Minimum: Lava starts at $100; Arch and Figure at $5K
  • Custody: Anchorage Digital (Arch) vs. qualified custodian (Figure) vs. self-custody (Lava)

Step 2: Verify Eligibility

Most platforms require:

  • ✓ U.S. residency (or compliance-jurisdiction residency)
  • ✓ Personal identity verification (KYC/AML)
  • ✓ Proof of funds

Arch Lending does not require a credit score. They’re licensed in 44 states.

Step 3: Set Up Custody

This varies by platform. At Arch, you’ll transfer your ETH to Anchorage Digital custody. At Figure, it goes to their qualified custodian. At Lava, you maintain self-custody.

Step 4: Receive Funds

Once approved, you’ll typically receive USDC or USD. Check which forms your platform supports.

Step 5: Make Payments

During the loan term:

  • Monthly interest payments are typical
  • Principal is often due at maturity (balloon loan structure)
  • Arch allows early repayment

Step 6: Recover Your ETH

Once you’ve fully repaid the loan, your ETH is released from custody. At Arch, you receive it back in a wallet you control.

Frequently Asked Questions

Can I lose my ETH?

Yes, in two scenarios: liquidation (if ETH drops and you’re borrowing near max LTV) or platform failure (rare with institutional custodians like Anchorage Digital).

To minimize risk: borrow well below your maximum LTV.

What happens if I can’t repay?

The lender will liquidate your ETH collateral to recover the loan amount and accrued interest. Any remaining value is returned to you.

Can I repay early?

Most Ethereum loan platforms allow early repayment without penalty, including Arch Lending.

What if ETH goes up while my loan is active?

Your ETH still sits in custody as collateral. Once you repay the loan, your ETH (which may have appreciated) is returned to you in full. You benefit from the appreciation after repayment.

Crypto-backed loans are legal in most U.S. jurisdictions, though regulations vary. Arch Lending is NMLS-licensed and operates in 44 U.S. states, which provides regulatory confidence.

What if the platform goes bankrupt?

At Arch Lending, your ETH is held at Anchorage Digital, not Arch’s own custody. Anchorage is a separate, insured entity—your ETH would be safeguarded even if Arch failed. This segregated custody model is a key advantage.

Conclusion

Ethereum-backed loans solve a real problem: how to access liquidity without selling. In 2026, the lending market for ETH is maturing, with multiple platforms competing on rates, terms, and features.

For ETH holders, the key considerations are:

  • Arch Lending offers rates as low as 7.25% APR for larger loans, multi-collateral support (BTC, ETH, SOL, XRP), and Anchorage Digital custody with no rehypothecation. The $5,000 minimum and no credit score requirement make it accessible.
  • Figure offers competitive rates (~10% APR) with up to 75% LTV — the highest in the market.
  • Lava is unbeatable for short-term needs (5% APR for 1-month loans).

The risks—liquidation, volatility, smart contract failures—are real, but they’re manageable with conservative borrowing (well below your max LTV).

Whether an Ethereum-backed loan makes sense depends on your view of ETH’s future, your need for liquidity, and your risk tolerance. But for ETH holders who believe in long-term appreciation, a crypto-backed loan is increasingly the best answer to the liquidity problem.

Ready to explore an Ethereum-backed loan? Visit archlending.com or use our loan calculator to see what you can borrow against your ETH.

Last updated: February 18, 2026 Next review: May 2026 (rates and platforms updated quarterly)

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