Liquidations
A liquidation happens when a loan's LTV reaches its pair's liquidation threshold. Someone repays part of the debt and receives collateral worth that debt plus the liquidation penalty. This keeps every pool able to pay suppliers back.
When a loan can be liquidated
Only when its LTV is at or above the liquidation threshold. That happens when the collateral price falls, when the debt asset's price rises, or as interest slowly adds to the debt.
What happens to you
- Part of your debt is repaid for you.
- You lose collateral worth that repaid debt plus the penalty.
- You keep the rest of your collateral and the tokens you borrowed.
How to avoid it
- Keep the health bar in green, well under the max LTV.
- Add collateral or repay some debt when the bar turns yellow.
- Know your liquidation price and how far the market would have to move.
- Borrow a stablecoin against a stablecoin if you want the least price risk.
These numbers are an example, not Fund's settings.
Your loan has $1,000 of USDC debt and a 5% liquidation penalty.
If the whole debt were repaid by a liquidator, they would receive $1,050 of your collateral.
Everything above that stays yours.
The exact rules, including the penalty and how much of a loan can be liquidated at once, are published here before borrowing opens.
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