Borrowing FAQ

Why would I borrow against my NFTs instead of selling them?
Selling your assets means losing the potential upside value gain and the utilities, triggering a capital gains tax event.
By borrowing, you can obtain liquidity (working capital) without selling your assets and not incurring in capital gains taxes. Users are mainly borrowing for unexpected expenses, leveraging their holdings, or for new investment opportunities.
How do I borrow?
How much I can borrow?
The maximum amount you can borrow depends on the value of the NFTs you have supplied as collateral and the available liquidity. For example, you can’t borrow an asset if there is not enough liquidity or if your health factor doesn’t allow you to. The amount you can borrow depends directly on the Loan-To-Value ratio.
What asset do I need to repay?
You repay your loan in the same asset you borrowed. For example, if you borrow 1 ETH you will pay back 1 ETH + interest accrued.
How much will I pay in interest?
The interest rate you pay for borrowing assets depends on the borrowing rate, which is derived from the supply and demand ratio of the asset. It changes constantly. You can find your current borrowing rate at any time in your dashboard.
Can I access the utility of my NFT if there is an active loan against it?
Depends on the utility. We are working towards full True Ownership. At the moment, you can check the available utilities.
What is the Health Factor?
The health factor is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The higher the value is, the safer your NFT is against a liquidation scenario.
If the health factor reaches 1, the liquidation of your deposits will be triggered. An asset with a Health Factor below 1 can get liquidated.
The health factor depends on the liquidation threshold of your collateral against the value of your borrowed funds. If you would like to know more technical details about the health factor calculation, you can find those here.
What happens if my Health Factor is reduced?
Depending on the price fluctuation of your deposited NFT, the Health Factor will increase or decrease. If your Health Factor increases, it will improve your borrow position by making the liquidation threshold more unlikely to be reached. If the value of your collateralized asset against the borrowed assets decreases instead, the Health Factor is also reduced, causing the risk of liquidation to increase.
When do I need to pay back the loan?
There is no fixed time period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow making your Health Factor decrease, which might result in your deposited assets becoming more likely to be liquidated.
How do I pay back the loan?
To pay back the loan, you simply go to the Borrowings section of your dashboard and click on the repay button for the asset you borrowed and want to repay. Select the amount to pay back and confirm the transaction.
How do I avoid liquidation?
To avoid the reduction of your Health Factor leading to liquidation, you can repay the loan to increase your health factor.
In the future, you will be able to deposit more assets to the loan's collateral.
Where can I learn more about what happens if my loan may be liquidated?
How does Unlockd calculate the value of my collateralized NFT?
Non-Fungible-Tokens provided for NFT-backed loans should be valued independently instead of using floor prices. Our appraisal mechanism relies on several third-party tools that appraise each individual NFT fairly, according to different models, input variables, and data science techniques.
When I give Unlockd access to manage an asset in my wallet, will this apply to all my assets?
Approvals happen at the NFT contract level. Once you have approved or granted Unlockd access to manage an asset, the Unlockd smart contract will have access to all of your assets minted on that contract. The NFTfi smart contract will not have access to manage NFTs minted on other contracts though.
For example, if you approve a BAYC and you have multiple apes and also a CryptoPunk, our smart contract will have the ability to manage all of your apes but not your CryptoPunk.
Remember - the only way for the contract to move the asset is for you to start a loan on the asset, so this can not happen automatically.
Do Borrowers pay gas fees?
Borrowers will pay gas fees for the operations listed below:
  • Approving Unlockd to interact with your NFT (once per NFT collection).
  • Approving the Unlockd smart contract to spend (repay) wETH for the first time (this is a one-time transaction)
  • Starting a loan
  • Repaying a loan (each time you repay any amount)
Are there any transaction fees for Borrowers?
Currently, Unlockd doesn't charge any fee for transacting in the protocol.
If you still have questions or issues, feel free to reach the Unlockd team in the official Discord or Telegram channel.