The (second) crypto crash of 2022 has been rough for those who decided to invest in faux money, but the NFT industry is rougher. Despite the fad fading, there are still new schemes popping up, including NFT loans for those who are deep in the hole.
Why are NFT loans now a thing?
Reported by Decrypt, crypto loan company Teller Finance has introduced NFT loans to its customers. Instead of just allowing people to take out crypto loans — not a good idea with crypto’s volatility at all — they can not take out loans on NFTs.
Very cringily dubbed the “Ape Now, Pay Later" scheme, members of the website can give each other loans for the express purpose of buying NFTs. That’s right, it’s not even the company giving out loans, it’s the users. Does that sound like a good idea to you?
Those who wish to buy an NFT can submit a down payment of 50% of that asset’s value. Afterwards, the website will try and match you with a loaner who will front the other half of the money. With some NFTs costing hundreds of thousands of dollars, both down payments and loans can be enormous.
As soon as an agreement is met, the wanted digital asset is placed in escrow. Afterwards, the buyer has to pay all of their loan payments on time in order to actually get the asset.
Read More: Japan working on anti-gravity homes for The Moon
A no brainier?
In a statement to Decrypt, Teller Finance CEO Ryan Berkun explained that the new NFT loans are a no brainier. With NFTs being one of the most popular parts of the crypto industry, Berkun believes that loans are an obvious addition.
“Buying NFTs is one of the core things Web3 consumers want to do right now," the CEO said . "Buy now, pay later is a no-brainer.
Of course, there’s a reason why loans on crypto are terrible ideas. For starters, the volatility of the industry means that one asset worth thousands could be worth nothing while you’re still paying off your loan for it. Additionally, the entire industry is a fad.
Loans have always been a predatory financial market, and with the crypto industry full of scams, crypto loans could be a world of hurt. So, if you’re ever thinking of taking out some NFT loans… don’t.