Borrowing

To borrow, you post collateral in a market and take a loan against it. Your debt grows with interest, and your collateral can be liquidated if your position becomes unhealthy. For the steps in the app, see Get started.

Your health factor

Your health factor compares your collateral with your debt:

health factor = collateral value x c_factor / (debt value / l_factor)

c_factor is the share of the collateral's value that counts. Both official markets set USDC's l_factor to 100%, so a USDC loan counts at face value. With XLM at an 80% c_factor, $1,000 of XLM supports up to $800 of USDC debt as far as the contract is concerned.

Below 1.0 your position can be liquidated. The app stops you earlier, at the limits on Official markets, so that you start with some room. Borrowing at the limit leaves you little of it. A small price drop or accrued interest can be enough to reach liquidation.

What moves your position

• Collateral price. Your health factor falls when the collateral falls relative to the debt.
• Interest. Your debt grows on its own, and rates rise with utilization. Rates are highest when a reserve is nearly fully lent.
• Time. Nothing warns you on-chain. Prices are only checked when someone acts on a position, so watch your own.

To improve your position, repay debt or add collateral. Adding collateral is not health-checked, so you can do it even below 1.0, unless the pool is frozen. If you open collateral in a new reserve while you hold debt, that step does need a usable price.

If you are liquidated

Anyone can open an auction on a position below 1.0. The auction runs on a 400-block clock of about 35 minutes:

Fillers normally step in when the trade turns profitable, and the difference is your liquidation cost. A partial liquidation has to leave you with a health factor between 1.03 and 1.15.

You can cancel an auction against you if your remaining position passes the health check and the pool is at status 0 or 1, so repaying or adding collateral may let you get out.

Limits to know

• Minimum collateral. Each reserve sets a minimum collateral position: 50 XLM, 1 USDC or 1 deJAAA in the current markets. A position must be zero or above that amount.
• Maximum utilization. A borrow fails if it would take the reserve past its max_util, which is 99% for USDC in both markets.
• Stale prices. If a price is refused, you cannot borrow or withdraw collateral while you hold debt. You can still repay. See what stops when a price is stale.
• Pool status. New borrows stop above status 1, for example when a pool is on-ice or frozen. Repayments continue, including after an admin freeze.