NFTs are no longer just a jpeg, nor an in-game asset, but a big business in the eyes of many developers. Using NFTs as collateral for a loan is now an option, NFTs lending (which allows people to lend out their NFTs as collateral to borrow crypto) is thriving. I did some research before deciding to take a loan against my NFTs (I’m loaning my Axies), here are the pros and cons:
**1. Get liquidity from NFTs without selling them**
We can’t always sell our NFTs instantly (unless at a very cheap price), borrowing crypto against NFTs became an instant liquidity option, which allows us to turn our asset into coins.
**2. For Axie Infinity players: still play and earn with Axies that have become collateral**
Some protocols like MetaLend allow gamers and scholars to continue playing with staked Axies and earn SLP, which is quite appealing. And we still have full control over our collateralized Axies.
**3. Change our mind anytime**
We can redeem our NFTs whenever we want.
**1. Some NFTs may be undervalued when there is a slump**
Market volatiles a lot, especially within the crypto market. Prices crash can lead to low appraisal, which means you can’t borrow much with your NFTs.
**2. Interest rate can be high**
Some lending protocols offer loans at extremely high interest rates, that’s what we call a loan shark (just make sure the protocol on your list isn’t one of them).
Many have told me to cut my losses, but I was like, my Axies might still be helpful for my investment even though it’s no longer its golden age… And more importantly, they still hold sentimental value to me and I would like to hold on to my Axies while exploring other uses.
Disclaimer: NONE of these are financial advice, just feel free to drop your thoughts.