NFT Finance, also known as NFTfi is the combination of nonfungible tokens (NFTs) with decentralized finance (DeFi), which opens up endless possibilities for innovative financial solutions. With NFTfi applications, NFT assets can be financially utilized to increase liquidity and capital efficiency. Various options are available, such as taking loans using NFTs as collateral, fractionalizing NFT assets for collective ownership, and buy now, pay later (BNPL) for NFTs.

NFT lending and borrowing work through decentralized lending protocols, such as NFTfi, BendDao, Arcade, X2Y2, and Paraspace. Peer-to-peer and peer-to-pool models exist, where borrowers list their NFTs as collateral to get a crypto loan, and lenders make crypto loan offers against that NFT to earn interest. If the borrower accepts the offer, they must pay off the borrowed amount plus interest at the end of the loan period. If they fail to do so, the lender becomes the new owner of the NFT. NFTfi allows borrowers to customize loan terms and specify interest rates and loan duration. BendDao, on the other hand, enables NFT holders to access instant NFT-backed ETH loans.

Fractionalizing NFT assets for collective ownership involves breaking down high-value NFT assets into multiple tokens, allowing for community collections, crowdfunding donations, or forming new DAOs. Platforms like Unic.ly, NFTx.io, and PartyBid allow for NFT fractionalization, depositing them into a vault, and minting share tokens of the protocols to earn staking rewards on decentralized exchanges.

BNPL for NFTs allows owning an asset over time by paying the debt in installments. Cyan and Halliday are BNPL solutions that offer different approaches, where users can make initial installments with one down payment and receive a cNFT version of the NFT until full ownership.

Overall, NFTfi offers a plethora of ways for DeFi and NFTs to merge, whether investors want to invest in NFTs or unlock the potential of existing assets.