NFT Loan is a feature that allows borrowers to use their NFTs as collateral to secure funds from Binance NFT. This overcollateralized, open-term, and peer-to-pool loan feature offers distinct Loan-to-Value (LTV) ratios for each NFT collateral-loan pair position.
The loan amount is based on the value of the NFT and the LTV ratio, which determines the maximum amount of credit issued based on the NFT’s value.
Each NFT collateral-loan pair position must be overcollateralized to secure a loan. This means that the value of the NFT collateral pledged by the borrower must exceed the value of the cryptocurrencies or digital assets advanced by the Binance NFT Loan.
Binance NFT Loans are open-term. Borrowers can keep their positions open indefinitely, provided that the product supports the loaned and collateral NFT and the relevant LTVs are not exceeded (i.e., the loans are not liquidated).
The benefits of using a Binance NFT Loan.
Instant borrowing
Zero gas fees
Liquidation protection
Low-interest rates
Here are NFTs which can be used as collateral.
Currently, Binance NFT Loan supports 4 NFT collections: Bored Ape Yacht Club, Mutant Ape Yacht Club, Azuki, and Doodles. More collections will be included in the future
How to borrow crypto using NFTs on Binance NFT?
1. Go to the Binance NFT Loan page.
2. Click Borrow Now.
3. Select an NFT collection under My Assets and click the NFT you want to use as collateral in exchange for your ETH loan.
Adjust the percentage on the slider, or enter the amount you want to borrow as a loan under I want to borrow.
Click Borrow.
4. You’ll then see a confirmation pop-up window. Double-check that you’re happy with the Borrow Amount and Interest rate and then Click Confirm.
Note: It’s important to proactively check the Health Factor of your loan on the NFT Loan page to mitigate liquidation risks.
How do you repay a loan in full and get your NFT back?
Here are a few important pointers regarding repayments:
Make sure you have sufficient ETH in your account for repayment.
Once you’ve repaid the loan in full, including interest and liquidation fee if applicable, the NFT will be released and returned to your account.
However, if you fail to make payment in full before the NFT enters the liquidation process, it will be sold in a Dutch Auction. In that case, you’ll lose ownership of your collateralized NFT, and the NFT will be transferred to the auction winner.
1. Go to the NFT Loan page. Click My Orders.
2. Go to the Ongoing orders tab and find the collateralized NFT. Click Repay.
3. You’ll see a Repay pop-up window. Adjust the slider to 100% and click [Repay].
What is the Health Factor?
The Health Factor is a loan safety metric based on your loan-to-collateral value ratio. The higher the value, the safer your funds' state is against a liquidation scenario.
The formula is as such:
Health factor = (NFT floor price * liquidation threshold) / debt with interest
Note: Floor price: Based on Binance’s Oracle pricing, and an aggregation from 2 data sources, i.e., Chainlink and OpenSea.
Liquidation Threshold: A critical level at which a borrower's collateral value, expressed as a percentage, must surpass to avoid liquidating their assets.
Debt: Your outstanding loan
Interest: Interest owed
Please proactively monitor your active loan's Health Factor on the NFT Loan page to mitigate liquidation risks, as liquidation notifications may be sent but are NOT guaranteed.
If the health factor is lower than 1.2, you’ll be notified by email/SMS to add a deposit every 6 hours.
If the health factor falls below 1, your loan will enter into the liquidation process, and you’ll be notified by email/SMS every 4 hours.
For NFT holders’ safety, there will be a 24-hour Dutch auction window where they can still repay their outstanding loans.
Outstanding Loan
Total Debt Amount = Borrowed Amount + Interest Accrued + Liquidation Fee (5% of the borrowed amount with interest)
Your NFT-backed loan will only not get liquidated if you repay within the 24-hours Dutch auction period before another person bids on your liquidated NFT.
Note:Binance NFT can’t guarantee that users can regain ownership of their NFT during liquidation, which is why it is vital to ensure your Health Factor does not go below 1. So make sure you do your own research before taking NFT Loan.
Copy and paste on this link for further understand about Binance NFT Loan.
https://www.binance.com/en/support/faq/what-is-binance-nft-loan-and-frequently-asked-questions-ec0b8bf53d4d412faa638c42207dec0d
