As they become even more popular, NFTs have become more commonly used as collateral for loans. Now, entire platforms have been set up to allow people to leverage their digital assets to borrow crypto or fiat currency.
One of the latest stories from the NFT-backed loan sector is $1.3 million worth of Ethereum which was borrowed by a user simply identified as ‘Fragment’. This loan was taken with two NFTs from the Mutant Ape Yacht Club as collateral.
This pricey loan was facilitated by NFT lending company Arcade who confirmed to the press that it is a non-recourse loan. This means that if the loan is defaulted on, the platform reserves the right to seize the assets.
The terms of the loan stipulate that 1,044 ETH has to be repaid in 90 days at an 18% APY. According to Gabe Frank, the CEO of Arcade, the crypto markets are stabilizing and this is allowing those within it to access the loans that they need while leveraging their assets.
“It’s awesome to see these loans getting funded in this market climate, and more so that it’s happening all on-chain via DeFi. Prices have stabilized some, and volatility has dropped, so lenders seem more willing to underwrite larger loans. At the same time, the mega mutants are incredibly rare assets.”
Source NFT Plazas