Deposit NFT collateral to get a loan
Borrowing on Honey is overcollateralised, meaning that borrowers must deposit more collateral than the amount they borrow.
Loans do not have fixed durations, meaning that interest accrues over time. As long as borrowers pay down their interest and the value of the collateral does not go down, positions can stay open indefinitely.
Interest rates (also called Borrow APRs) are variable, which means they accrue over time at different speeds. If a variable interest rate is set to 365% Borrow APR, it means each day interest will accrue by 1%.
Loan to value (LTV) is an indicator of how much can be borrowed from a collateral's value. A 50% LTV means that half of a collateral's dollar value (floor price) is given out to the borrower as a loan.
Maximum LTV is determined by market admins, but users cannot currently select values higher than 40%. Positions with higher LTVs have a higher risk of being liquidated for the as a small decrease in the value of the collateral could mean a liquidation.
A position's liquidation threshold determines the maximum LTV at which collateral can be liquidated. At the moment, liquidation thresholds for NFTs are set at 65% LTV.
Each market has its own liquidation threshold based on the risk of the underlying collateral. Liquidation thresholds are at the discretion of market admins, who manage lending markets on Honey.
To make tracking positions more intuitive, Honey features risk levels for each position. The risk level represents how close a position is to its liquidation threshold.