As NFTs have risen in popularity, so too have their inherent value increased. Accessing the value residing in the NFT without having to sell the asset is the core function of NFT lending, or NFT-based lending and borrowing.
NFT lending allows the owner to leverage their NFTs as collateral, in similar fashion to traditional assets. A lender may decide the NFT value by checking its past performance, sales history, or other similar NFTs' prices, then offer a loan. Once both lender and borrower agree on the loan, the NFT will get locked in the NFT collateral pool; a cryptocurrency amount will be transferred from the lender's account into that of the borrower.
Once the borrower repays the loan, the asset will get back to the borrower's wallet while the lender will receive an attractive return. In case the borrower can't repay the loan and interest by the end of the loan period, the NFT will be transferred to the lender.