# Borrowing

Borrowers request **fixed duration** loans with their NFTs being used as collateral. If the loan is not paid back before the end of the fixed duration, the lender will be able to redeem and own the NFT collateral from the borrower.

You can follow our step-by-step tutorial below:

{% content-ref url="/pages/3CUibXAWLrgs8KZvP11c" %}
[Broken mention](broken://pages/3CUibXAWLrgs8KZvP11c)
{% endcontent-ref %}

## Paying interest

Interest accumulates over the duration of the loan. The earlier interest is paid, the less borrowers interest will accrue.

When requesting a loan, borrowers list the maximum interest rate they're willing to pay.

{% hint style="warning" %}
Interest rate refers to the premium borrowers pay lenders over the fixed duration of the loan.\
\
Interest rates over different durations can be misleading. It is important to annualise the interest to compare rates to one another.
{% endhint %}

## Repayments

Repayments are done all at once at any point throughout the duration of the loan. Repaying loans earlier only affects the interest that has had time to accrue, but the debt will always have to be refunded in full to the lender to avoid liquidation.

## Durations

Honey P2P durations last a minimum of 1 day, and have no maximum duration. They are chosen by borrowers when asking for loans. 

## Liquidation

If the debt and interest has not been repaid in full by the end of the fixed duration, lenders will have the ability to liquidate the collateral and take ownership of the borrower's NFT.

In Honey P2P, lenders play the role of liquidators, and can seize the collateral if the borrower does not pay back their loan.

Until the lender decides to liquidate, borrowers can still repay their loan and get their NFT back. This creates an incentive for lenders to liquidate positions as fast as possible after the fixed duration is up.

**There are no grace periods on Honey P2P, which means lenders can liquidate as soon as the fixed duration is up.**

## Want to learn more ?

{% content-ref url="/pages/pj2yeui4SbZrUJYPcS47" %}
[Peer-to-Peer FAQ](/faq/faq/peer-to-peer-faq.md)
{% endcontent-ref %}


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