🖼️Intro to NFT Loans

NFT Loans 101

NFT collateralized loans are nothing new to DeFi space across all chains, the fundamentals are simple - use your NFT as collateral in exchange for liquidity. Now... the way in which end-users optimize their liquidity with the current financing tools in the ecosystem brings an interesting topic of discussion of how many mechanisms and frameworks there are for both retail and institutions to optimize on NFT backed loans and if the current state of these such frameworks and mechanisms are even the CORRECT approach for not only a simple and frictionless UX/UI experience for the end users but the best approach for truly scalable worldwide adoption of crypto-based financing.These thoughts are beyond just NFT loans in general, this includes renting, leasing, etc. of both fungible and non-fungible tokens. NFT loans nonetheless are the stepping stone to continue the momentum in the right direction.

Terminology

LTV: The loan-to-value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. $LTV Ratio = Loan Amount /NFTAppraisedValue$

Interest Rate: The interest rate is the amount a lender charges a borrower and is a percentage of the principal—the amount loaned.

APY: Annual percentage yield (APY) is the real rate of return earned on an investment, taking into account the effect of compounding interest. $APY =\left(1+\frac{i_\text{nom}}{N}\right)^{N}-1$

Principal Amount: Principal is the money that you originally agreed to pay back. Interest is the cost of borrowing the principal.

Loan Duration: A loan term is the duration of the loan until it's paid off.

Loan Request: A loan request is a deal term that is uploaded by prospective borrower in the Banco marketplace.

Credit NFT Rating: FA2 Token with an estimate of the ability of a borrower to fulfill their financial commitments, based on previous dealings. This scoring system is based with a starting rate of 0 (Lowest) all the way to 100 (Highest) $Credit Rating = (Loans Repaid / LoansBorrowed *100)$

Vault: A bundle of fungible and non-fungible assets that borrowers can leverage as collateral in loan requests. LID: LoanID, this is how anyone can look up current and past loan requests information.