What happens at liquidation
At liquidation the lender takes the NFT directly (NFTfi-style) or it goes to a Dutch auction that starts high and drops until it sells (Blur Blend's mechanic). This compares what the NFT is worth at today's floor against what you still owe.
Refinance vs repay now
How NFT-backed loan liquidation is calculated
NFT-collateralized lending protocols — NFTfi, Blur Blend, BendDAO and similar — all liquidate on the same core mechanic Aave-style DeFi lending uses, just with an NFT collection's floor price standing in for collateral value:
- Loan value owed = principal + (principal × APR × elapsed days ÷ 365) — simple interest accrual, standard for these protocols
- Health factor = (current floor price × liquidation threshold) ÷ loan value owed
- Liquidation floor price = loan value owed ÷ liquidation threshold — the floor price at which health factor drops to 1.0 and liquidation triggers
- Max floor-price drop to liquidation = (current floor price − liquidation floor price) ÷ current floor price × 100
Worked example
Floor price $30,000, loan value owed $18,000 (60% LTV), liquidation threshold 70%:
- Liquidation floor price = $18,000 ÷ 0.70 = $25,714
- Health factor at current floor = ($30,000 × 0.70) ÷ $18,000 = 1.167
- Max drop to liquidation = ($30,000 − $25,714) ÷ $30,000 = 14.3%
That NFT can drop about 14.3% in floor price before this loan gets liquidated. Everything scales the same way whether the loan is $1,800 or $180,000 — only the ratios matter.
Typical liquidation thresholds by protocol
Liquidation thresholds on NFT-backed loans typically run 50–70% LTV-equivalent depending on collateral quality — blue-chip collections like a top-10 by volume tend to sit at the higher end, illiquid or volatile collections lower. This calculator defaults to 60% but it's a user input — set it to whatever your actual loan terms specify.
- NFTfi — peer-to-peer fixed-term loans; the lender simply keeps the NFT if the borrower doesn't repay by the due date. There's no floor-price liquidation trigger mid-term on the classic product — default is judged at maturity, not by price.
- Blur Blend — perpetual (no fixed maturity) lending against floor price with a Dutch-auction liquidation: once health factor breaches the trigger, the position is auctioned starting above market and dropping until a lender refinances it or it sells.
- BendDAO-style pools — pooled liquidity with an on-chain health factor much like Aave; liquidation triggers automatically once floor price × threshold falls below debt.
See also: NFT profit calculator (marketplace flip P&L — a different risk than borrowing) · DeFi health factor calculator · Loan-to-value calculator
Frequently asked questions
What is the health factor on an NFT-backed loan?
Health factor = (current floor price × liquidation threshold) ÷ loan value owed. On protocols like NFTfi, Blur Blend and BendDAO it works the same way as Aave's health factor, just with an NFT collection's floor price standing in for collateral value. Above 1.0 you're safe; at 1.0 the position gets liquidated.
At what floor price does an NFT-backed loan get liquidated?
Liquidation floor price = loan value owed ÷ liquidation threshold. If you owe $18,000 against a 70% liquidation threshold, liquidation triggers the moment the floor drops to $18,000 ÷ 0.70 = $25,714. Any floor price above that keeps the loan alive.
What happens to my NFT when a Blur Blend or NFTfi loan gets liquidated?
The lender takes the NFT — either directly (NFTfi-style peer-to-peer loans default to the lender) or through a Dutch auction that opens high and drops until it sells (Blur Blend's mechanic). Whether any sale proceeds above the debt come back to you depends on the specific protocol — some return the surplus, some let the lender keep it all. Either way, the NFT is gone.
Should I refinance an NFT loan close to liquidation or just repay it?
Repaying now costs exactly what you owe and ends the liquidation risk immediately. Refinancing extends the loan at a new APR, which adds interest on top of what you already owe — and because the debt grows, the floor price needed to stay safe goes up too. Refinancing only makes sense if you're confident the floor will recover before that new, higher liquidation floor price is reached.