# Borrowing and Lending

The NFT Collateralized Loan System on CoDEX offers a unique way for NFT enthusiasts and holders to leverage their digital assets. By combining liquidity pools and time-locked loans, this system ensures fairness, security, and accessibility without requiring dex-owned liquidity. Here's how it works:

<figure><img src="https://3850185719-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FxWLFhhq0GYmIS6hfRkvn%2Fuploads%2FI1nhbzRDKIEUyAHs0f8I%2FCollateral%20Trading0.png?alt=media&#x26;token=e25b6f8e-6b62-40b2-81d1-39ba8b8f12e9" alt=""><figcaption></figcaption></figure>

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<mark style="color:purple;">**Core Components**</mark>

— **Loan Creation (404 Mechanism)**

* NFT owners create a 404 contract by locking their NFT into the dex.
* Lenders' locked tokens are transferred to the borrower.

— **Repayment Terms**

* Borrowers must repay 95% of the current FP of the NFT to reclaim it.
* A 15% fee of the FP goes to the dex for facilitating the process.

— **Interest Section for NFTs**

* Users can lock tokens in a dedicated section indicating their interest in specific NFTs (e.g., Fable Beras, Brained Beras).
* Locked tokens must represent 85% of the current floor price (FP) of the selected NFT.

— **Loan Default**

* Borrowers have 30 days to repay the loan.
* If the borrower fails to repay, the NFT is transferred to the lender’s address.

— **Time-Based Fee Tiers for Loans**

* A tiered fee structure is implemented to incentivize timely loan repayments and accommodate varying durations:
* Short-Term (1–10 days): Lower fee (10% of FP).
* Medium-Term (11–20 days): Moderate fee (12.5% of FP).
* Long-Term (21–30 days): Standard fee (15% of FP).

<figure><img src="https://3850185719-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FxWLFhhq0GYmIS6hfRkvn%2Fuploads%2FSxysu3W9rJcL5u4Jpmx8%2FBorrow%20against%20NFT0.png?alt=media&#x26;token=ab3abe69-9802-4856-97cd-95c11ce86cfd" alt=""><figcaption></figcaption></figure>

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<mark style="color:purple;">**Benefits**</mark>

* Dynamic NFT Utility: Unlocks liquidity without selling the NFT outright.
* Risk Management: NFTs are collateralized and secured until repayment.
* No Dex-Owned Liquidity Risk: Reduces dependency on centralized liquidity.
* Flexibility: Borrowers choose repayment terms; lenders can diversify interests.

<figure><img src="https://3850185719-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FxWLFhhq0GYmIS6hfRkvn%2Fuploads%2FTCL5j2PYfkz6Cewkqkph%2FVen%20diagram0.png?alt=media&#x26;token=02745af8-09eb-4551-93ad-ccce2a5971d4" alt="" width="375"><figcaption></figcaption></figure>

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