Loans that are liquidated due to a bad Health Factor or missed interest payments will automatically fall into Graced Period Loans. Users will have up to 48 hours to redeem their NFT.
Users can redeem the NFT from the Graced Loans section by paying the loan, the outstanding interest and a liquidation fee of 10%. Once the Grace Period of 48 hours has expired, the NFTs will be moved to the Liquidated Loans section.
Upon liquidation, the liquidated NFT will be sent to XOXNO for auctioning/selling.
Health factor allows users to easily monitor the health of their loans. Health factor: (Floor Price * Liquidation Threshold) / Debt with Interests.
NFT floor prices are calculated using an inhouse algorithm to avoid manipulation. For these exact reasons, the way NFT floor prices are calculated cannot and will never be disclosed by JewelSwap.
The Liquidation Threshold is set to 90%.
The risk level of the health factor:
HF < 1.0 (Red) – Loan will be liquidated and sent to Graced Period Loans. 1.0 <= HF <1.5 (Orange) – Loan should be carefully monitored. 1.5 <= HF (Green)- Loan is in safe zone.
A loan that was recently moved to the "Graced Period". The user borrowed 1 EGLD against an NFT that was worth 2 EGLD when he opened the loan.5
The Loan will fall into Grace Period, which means the user has 48 hours time to redeem the NFT by paying back the borrowed funds, the outstanding payments and a 10% liquidation fee (the 10% fee is only on the borrowed amount).
1 EGLD borrowed + 0.04 EGLD interest payment + 10% liquidation fee (0.1 EGLD) = 1.14 EGLD
By paying 1.14 EGLD, the user can immediatelly redeem the NFT, despite the fact that the Loan has been closed.
If the user decides not to redeem the NFT within the 48 hour window, the NFT will be sold/auctioned on XOXNO.