The idea of a zero-interest crypto loan sounds almost too good to be true. In practice, it rarely means “free money.” Instead, it usually reflects a specific lending structure where interest is avoided under clearly defined conditions.
One of the clearest examples of this model is Clapp, which offers a crypto-backed credit line where unused funds carry a 0% interest rate when the loan-to-value (LTV) ratio remains below 20%. To understand what that actually means, it helps to break the mechanics down.
What “Zero-Interest” Means in Crypto Lending
Traditional crypto loans work like this: you lock crypto as collateral, borrow against it, and interest starts accruing immediately on the full loan amount. Whether you need the funds or not, the cost begins from day one.
Clapp takes a different approach. Instead of issuing a fixed loan, it provides a revolving credit line backed by your crypto. You are approved for a borrowing limit, but you only pay interest on the portion you actually use.
How Clapp’s 0% Interest Model Works
When you deposit crypto into Clapp, you unlock a credit limit based on the value of your collateral. From there:
- •Unused funds accrue 0% interest
- •Interest applies only to the amount you actively borrow
- •Keeping your LTV below 20% keeps borrowing costs minimal and reduces risk
In practical terms, this means you can set up a credit line and leave it untouched — or partially used — without paying interest on the unused portion. If you never draw from it, your cost is effectively zero.
A Simple Example
- •You deposit crypto worth $50,000
- •Clapp grants you a credit line
- •You borrow $8,000
Your LTV is 16%. The remaining available credit is unused — and that unused portion carries a 0% interest rate. Interest accrues only on the $8,000 you actually borrowed, not on the full credit line.
This setup is especially useful for people who want liquidity on standby, rather than immediate cash.
Why the 20% LTV Threshold Matters
Loan-to-value is the main risk metric in crypto lending. A lower LTV means:
- •More buffer against market volatility
- •Lower liquidation risk
- •Lower borrowing costs
Clapp’s model encourages conservative borrowing. Staying below 20% LTV doesn’t just reduce interest — it keeps the credit line stable even during sharp market moves.
Importantly, the condition to borrow at 0% interest applies to unused funds, not to borrowed funds. Clapp does not claim that all borrowed crypto is permanently interest-free. Instead, it removes the cost of access to liquidity until you actually use it.
No Forced Schedules, No Idle Costs
Another key aspect of Clapp’s structure is flexibility:
- •No fixed repayment dates
- •You can repay partially or fully at any time
- •Your available credit replenishes automatically as you repay
This makes the credit line closer to a financial tool than a traditional loan. You are not paying for capital you are not using, and you are not locked into rigid terms.
Who Zero-Interest Credit Lines Are For
This model works best for users who:
- •Want to avoid selling crypto
- •Need occasional liquidity, not constant leverage
- •Prefer low-risk borrowing strategies
- •Value predictability over aggressive yield plays
It is less suitable for high-LTV borrowing or short-term speculation, where interest costs and liquidation risk rise quickly.
The Bottom Line
Zero-interest crypto loans are rarely “free” in the absolute sense. With Clapp, the zero-interest component applies to unused funds, provided your LTV stays below 20%. That distinction makes all the difference.
Rather than encouraging heavy borrowing, this model rewards restraint. You gain access to liquidity without paying for it upfront — and only incur costs when you decide to use it.