DeFi lending vs bank loans — key differences

When borrowing capital, the choice between decentralized protocols and traditional institutions shapes cost, speed, and control. Here is a side-by-side look.

Feature - DeFi Lending - Bank Loans
Access - Permissionless, 24/7 - KYC required, business hours
Collateral - Crypto assets, over-collateralized - Credit score, income, assets
Interest rates - Algorithmic, variable - Fixed or prime-based, negotiated
Approval time - Minutes, on-chain - Days to weeks, manual review
Custody - User holds keys - Bank holds funds
Transparency - Public ledger, auditable - Private contracts, opaque terms
Risk profile - Smart contract, liquidation - Counterparty, regulatory
Global reach - Borderless, no borders - Jurisdiction limited, FX fees

Pros DeFi: open access, instant settlement, programmable terms, yield on idle crypto. Cons: volatile collateral, no recourse, technical complexity, regulatory uncertainty.

Pros Banks: legal protection, stable rates, relationship banking, deposit insurance. Cons: exclusionary criteria, slow process