Loan Function
The Swap Function lets you instantly buy and sell NFTs, but it doesn’t guarantee you can buy back the exact same one as someone else may acquire it from the vault. For users who want P-Token exposure without giving up their original NFT, Paddle ETF offers the Loan Function.
By pledging your NFT as collateral, you can borrow its corresponding P-Tokens with nearly 100% LTV. Your NFT is locked in our audited smart contract and will be returned to you once you repay the loan in full. This allows you to unlock liquidity and participate in DeFi, while still retaining ownership of your NFT.
The Loan Function uses an isolated margin structure, meaning each NFT loan is a separate order with its own interest rate and duration. For example, borrowing against 10 NFTs will require 10 individual loan orders.
How to Borrow P-Tokens with NFTs
Go to the Loan page and select the NFT you want to borrow against (only supported collections will be displayed). Example: choose one of your Bored Ape Yacht Club NFTs.
Select your desired loan duration, e.g., 30 days.
An annual margin rate (X%) is applied, and interest for the selected term is deducted upfront from the principal (1,000 P-Tokens per NFT).
Example: For 30 days, you receive:
1,000 × (1 - X% × 30/365)P-BAYC in your wallet.
Your NFT will be locked in the ETF protocol during the loan period.
To redeem your NFT after N days, repay:
1,000 × (1 - X% × 30/365)(principal received)+ 1,000 × (X% × N/365)(remaining interest)
Once repaid, your original NFT is sent back to your wallet.
Benefit of Borrowing with NFTs via Paddle NFT ETF
Maximized Capital Efficiency (100% LTV)
Loans are issued at nearly 100% LTV in P-Tokens, which can be instantly swapped for APE via DEX. For example, if your GEEZ NFT has a 1,000 APE floor price, you could borrow ~950 APE worth of P-Tokens against it, unlocking maximum liquidity without selling.
0 risk of mid-term liquidation
With the ETF Loan Function, there’s no risk of liquidation due to market volatility during the loan period. As long as you repay the agreed P-Token amount before the loan expires, your NFT is guaranteed to be returned. Unlike traditional NFT lending platforms, where borrowers are exposed to both token (ETH/APE) and NFT price swings, Paddle NFT ETF limits your exposure to the P-Token value only, making risk management far simpler.
Liquidation
In traditional NFT lending, borrowers face the risk of liquidation if NFT prices drop during the loan term. The ETF Loan Function is designed to remove this risk. When you borrow P-Tokens against your NFT, you cannot be liquidated mid-loan due to market fluctuations.
As long as you repay the agreed P-Token amount before the loan expires, your NFT will be returned to you. If the repayment deadline is missed, the pledged NFT will be made available through the Swap Function, allowing anyone holding the corresponding P-Tokens to acquire it.
This liquidation model ensures no bad debt in the ecosystem: the P-Token mechanism absorbs the risk. Additionally, NFTs are never dumped directly onto public marketplaces, preventing unnecessary floor price damage.
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