Loan-to-value (LTV) is a key metric used in lending, and it is no different when it comes to lending against Non-Fungible Tokens (NFTs) on the Liqd platform. In simple terms, LTV is the percentage of the value of an asset that is being borrowed against. In the case of NFTs, it is the percentage of the value of an NFT that is being borrowed against.
LTV is important because it helps to determine the risk of a loan, and the likelihood of the borrower defaulting on the loan. A higher LTV ratio indicates a higher risk of default, as the borrower is borrowing a larger amount of money relative to the value of the asset they are using as collateral. On the other hand, a lower LTV ratio indicates a lower risk of default, as the borrower is borrowing a smaller amount of money relative to the value of the asset they are using as collateral.
For lenders, LTV is important because it helps them to determine the risk of a loan and the weather a borrower will default on it. Lenders will typically charge a higher interest rate for loans with a higher LTV ratio, as they are considered to be riskier.
In the eyes of borrowers, LTV is important because it affects the amount of money they can borrow, and the interest rate they will be charged. Borrowers will typically be able to borrow more money and be charged a lower interest rate for loans with a lower LTV ratio, as they are considered to be less risky.
When it comes to lending against NFTs on the Liqd platform, it is important to consider the implications of LTV being too high or too low. If the LTV ratio is too high, it can be difficult for the borrower to repay the loan, as they are borrowing a large amount of money relative to the value of the NFT. This can lead to the borrower defaulting on the loan, and the lender potentially losing the NFT.
On the other hand, if the LTV ratio is too low, it can be difficult for the borrower to access the liquidity they need, as they are only able to borrow a small amount of money relative to the value of the NFT.
It is important for both borrowers and lenders to consider LTV when lending and borrowing against NFTs on the Liqd platform. For borrowers, it is important to consider the amount of money they need to borrow and the value of their NFT, and for lenders, it is important to consider the risk of the loan and the value of the NFT. To ensure that LTV is considered accurately, Liqd has partnered with Nabu, the NFT valuation platform, to provide an up-to-date valuation of the NFT when using the Liqd platform. Below is Nabu's examples of apprasals
LTV is a critical metric when lending and borrowing against NFTs, and the Liqd platform takes that into consideration. Therefore Liqd's partnership with Nabu helps to ensure that LTV is considered accurately, making it easier for borrowers to access liquidity and for lenders to make risk-free interest on their capital.
