How NFT-Backed Loans Work on JewelSwap

Your NFTs are probably just sitting in your wallet, doing nothing. What if they could unlock spendable EGLD without you ever having to sell them? That is exactly what NFT-backed loans on JewelSwap make possible. Instead of parting with a JPEG you believe in, you lock it up as collateral, borrow against it, and reclaim it the moment you repay. This guide breaks down precisely how the mechanic works on MultiversX, from the peer-to-pool model to the Health Factor, interest plans, and what happens if things go sideways.

What Is an NFT-Backed Loan?

An NFT-backed loan is a form of collateralized lending. Rather than pledging a house or a car, you pledge a non-fungible token from a supported collection. In return, you receive an instant loan denominated in EGLD, MultiversX's native token. Your NFT is held safely by the protocol for the life of the loan, and the day you repay what you owe, it comes straight back to your wallet.

The appeal is simple: liquidity without a sale. If you hold a blue-chip NFT and need cash for a new mint, a trade, or an unexpected expense, selling means giving up an asset you may expect to appreciate, and it can trigger a taxable event. Borrowing against it lets you keep long-term exposure while accessing short-term funds. It is the same logic that has powered traditional secured lending for centuries, now expressed on-chain and settled in minutes rather than weeks.

The Peer-to-Pool Model

JewelSwap uses a peer-to-pool design, and understanding it is key to understanding everything else. In a peer-to-peer setup, an individual borrower must be matched with an individual lender who agrees to specific terms. That is slow and often leaves borrowers waiting.

In the peer-to-pool model, lenders deposit EGLD into a shared liquidity pool. When you take a loan, your funds are drawn from that collective pool rather than from one counterparty. This means loans are available on demand: as long as the pool has liquidity and your NFT belongs to a supported collection, you can borrow instantly. The pool spreads risk across many lenders and keeps the borrowing experience frictionless. If you want the full mechanics straight from the source, the NFT Loans Explained documentation is the canonical reference.

Verified Collections Only

Not every NFT can be used as collateral. Only NFTs from verified collections are eligible for NFT Loans and the related NFT Mortgage product. Verification matters because the protocol needs reliable floor-price data and sufficient market liquidity to value collateral and, if necessary, liquidate it. You will find the current list of eligible collections directly in the borrow section of the JewelSwap app. If a collection is not listed, it simply cannot be used for a loan yet, though the roster expands over time.

How Much Can You Borrow? The 50% Rule

The standard borrow limit is up to 50% of your NFT's value in EGLD. If the protocol values your NFT at 3 EGLD, you can borrow up to 1.5 EGLD against it. This conservative loan-to-value ratio is deliberate: it leaves a healthy buffer so that normal price swings do not immediately put your loan underwater.

Exceptions to the 50% Limit

A handful of specialized NFTs qualify for a much higher limit. NFTs that represent EGLD-unstaking positions carry far less price risk because their value is tied to EGLD itself rather than to a volatile collectible market. Two documented exceptions currently allow a borrow limit of 90%:

UJWLEGLD NFTs — these represent EGLD-unstaking positions on JewelSwap.
Hatom Unbond NFTs — these represent sEGLD unstaking positions on Hatom.

Because these instruments are essentially EGLD in transit, the protocol can safely lend against nearly their full value. The documentation notes that more exceptions may be added over time, so the list of high-limit assets can grow.

Interest Plans and Repayment Cycles

When you open a loan, you choose an interest plan. Each plan sets a recurring cycle and a flat interest rate charged per cycle on the borrowed amount. JewelSwap offers four options:

1 day — 0.5% of the borrowed amount, paid daily.
3 days — 1% of the borrowed amount, paid every three days.
7 days — 2% of the borrowed amount, paid weekly.
16 days — 4% of the borrowed amount, paid every 16 days.

Interest rates are set by the JewelSwap platform, and you can see them laid out on the NFT Interest Plans page. The key thing to grasp is that these are cyclical payments. To keep your loan active and healthy, you pay the accrued interest before each due date. When you are ready to close the position and get your NFT back, you repay the full borrowed principal plus any outstanding interest.

A Worked Example: A 1.5 EGLD Loan

Say you borrow 1.5 EGLD against a verified NFT and select the 16-day interest plan at 4%. The interest for that cycle is 4% of 1.5 EGLD, which comes to 0.06 EGLD. Before the 16 days are up, you pay that 0.06 EGLD to keep the loan in good standing. You can repeat this cycle for as long as you need the liquidity, paying 0.06 EGLD every 16 days. Whenever you decide to exit, you repay the 1.5 EGLD principal (plus any interest owed for the current cycle) and your NFT is released back to your wallet immediately. Choosing a shorter cycle lowers the per-payment amount but requires more frequent attention; a longer cycle is more hands-off but costs more per period.

The Health Factor: Your Loan's Vital Sign

The Health Factor (HF) is the single most important number to watch once your loan is live. It measures how safe your position is relative to the value of your collateral, and it is calculated as:

Health Factor = (Floor Price × Liquidation Threshold) ÷ Debt with Interest

The liquidation threshold is 90%. As your collateral's floor price rises or your debt shrinks, your HF climbs; if the floor price falls or interest accrues unpaid, your HF drops. JewelSwap color-codes the risk zones so you always know where you stand:

Green (HF of 1.5 or higher) — a safe, comfortable position.
Orange (HF between 1.0 and 1.5) — a caution zone worth monitoring closely.
Red (HF below 1.0) — the loan is subject to liquidation.

Keeping your Health Factor comfortably in the green is straightforward: pay interest on time and, if the market dips, repay part of your principal to reduce debt. Floor prices are computed by the protocol's proprietary algorithms, which are intentionally not fully disclosed to prevent manipulation.

What Happens on Default or Liquidation?

A loan moves toward liquidation when its Health Factor falls below 1.0, whether because collateral value dropped sharply or because interest payments were missed. Liquidation is not an instant loss of your NFT, though. JewelSwap builds in a grace period to give borrowers a fair chance to recover.

The 48-Hour Grace Period

Once a loan is liquidated, it is sent to the Graced Period Loans section, where you have up to 48 hours to redeem your NFT. To reclaim it during this window, you repay the original loan amount plus accrued interest and a 10% liquidation fee applied to the borrowed principal. For example, a 1 EGLD loan carrying 4% interest plus the 10% liquidation fee totals 1.14 EGLD to redeem. Pay that and your NFT is yours again.

After the Grace Period

If the 48 hours pass without redemption, the NFT moves to the Liquidated Loans section and is sent to XOXNO, the MultiversX marketplace, for auction or sale. The full liquidation flow, including the color-coded risk bands and redemption math, is documented on the NFT Liquidation page. The takeaway for borrowers is that liquidation is a process with clear warning signs and a recovery window, not a sudden trapdoor.

Where Lenders' Funds Come From, and the Interest Split

Every EGLD you borrow comes from lenders who have deposited their own EGLD into the pool. They take on the counterparty risk, and in return they earn the lion's share of the interest borrowers pay. The split is 70% to lenders and 30% to the protocol: most of every interest payment flows straight to the EGLD lenders funding the pool, while a smaller portion supports JewelSwap.

This is what makes the system self-sustaining. Borrowers get on-demand liquidity, and lenders get a real yield backed by over-collateralized loans. If earning that yield sounds appealing, our guide on how to earn yield as an NFT lender on JewelSwap walks through the depositor side in detail.

Benefits of NFT-Backed Loans

Liquidity without selling — access EGLD while keeping long-term exposure to your NFT.
Instant and permissionless — the peer-to-pool model means no waiting for a counterparty match.
Flexible terms — pick the interest cycle that fits how actively you want to manage the loan.
Transparent risk — the Health Factor and color bands make your position easy to read at a glance.
Fair recovery — the 48-hour grace period gives you a genuine chance to save your NFT.

Risks to Understand

Price volatility — if your collection's floor price drops, your Health Factor falls and liquidation becomes possible.
Ongoing obligations — miss an interest payment and your loan can be pushed toward liquidation regardless of price.
Liquidation cost — recovering a liquidated NFT means paying the 10% liquidation fee on top of principal and interest.
Collection eligibility — only verified collections qualify, so not every NFT can be borrowed against.

Used carefully, NFT-backed loans are a powerful tool for putting idle assets to work. The borrowers who thrive are the ones who borrow conservatively, watch their Health Factor, and keep interest current. If you treat the 50% limit as a ceiling rather than a target and leave yourself a buffer, you give your position plenty of room to breathe. 🙏

FAQ

Can I get my NFT back after taking a loan?

Yes. Your NFT is returned to your wallet the moment you repay the full borrowed principal plus any outstanding interest. It is held as collateral only for the life of the loan.

How much can I borrow against my NFT?

Up to 50% of the NFT's value in EGLD for standard collections. Certain EGLD-unstaking NFTs, such as UJWLEGLD and Hatom Unbond NFTs, qualify for a 90% borrow limit because they carry far less price risk.

What triggers liquidation?

Liquidation happens when your Health Factor falls below 1.0, which occurs if your collateral's floor price drops significantly or if you miss interest payments. You then have up to 48 hours to redeem the NFT by repaying principal, interest, and a 10% liquidation fee.

Do I have to sell my NFT to use it?

No. The entire point of an NFT-backed loan is to unlock liquidity without selling. You keep long-term ownership as long as you meet the loan terms.

Where does the borrowed EGLD come from?

From a shared liquidity pool funded by lenders who deposit EGLD. Those lenders earn 70% of the interest paid, with the remaining 30% going to the protocol.

Is this the same as an NFT Mortgage?

They are related but distinct. A loan lets you borrow against an NFT you already own, while an NFT Mortgage lets you buy an NFT now and pay it off over time. See our NFT Mortgages buy-now-pay-later guide for the full comparison.