Borrowing

Deposit Collateral before Borrowing

Before borrowing, you have to supply assets into the system as collateral for your loan. The more assets that you supply into Pret, the greater the amount that you can borrow. Additionally, each asset supplied has a different collateral factor that determines the amount you can borrow.

How can I borrow?

After deposit, browse to the “Borrow” section and click on “Borrow” for the asset you want to borrow. Set the amount you need based on your available deposits that would be used as a collateral for the loan and confirm your transaction.

How much can I borrow?

The maximum amount you can borrow depends on the value you have deposited and the available liquidity. Specifically, you can borrow an asset only if there is enough liquidity and your health factor reaches the standards. You can find the specific parameters of each available collateral for borrowing in the Risk Parameters.

How do I repay？

To pay back your loan, you need to go to your “Dashboard” and click on the “Repay” button. Choose repay "With your current collateral" and select the asset you want to repay and the amount on the left side (Borrowed Asset).

In the next step you need to send the approval and submit the transaction. The approval transaction will only be required the 1st time you do this step, unless you revoke the approval. After sending both transactions your repayment will be done.

When do I need to repay?

There is no time limit to pay back the loan. Technically, you can borrow for any period as long as your position is safe. However, as time passes, the accrued interest will grow, making your health factor decrease and increasing the risk of liquidation.

What assets do I need to repay?

You repay your loan in the same asset you borrowed for both principal and interest. You can also use your collateral to repay. If you want to pay back the loan based on USD price you can borrow any of the available stable coins as USDC, USDT, etc.

How much should I repay?

The interest rate you pay for borrowing assets depends on the borrowing rate which is derived from the supply and demand ratio of the asset. You can find the current borrowing rate at any time in the “Borrow” section. Additionally, Molend Protocol follows the variable interest rate with the Variable Interest Rate Parameters.

Risks of Borrowing

Health Factor

The health factor is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The higher the value is, the safer the state of your funds are against a liquidation scenario.

Depending on the value fluctuation of your deposits, the health factor will increase or decrease. If your health factor increases, it will improve your borrow position by making the liquidation threshold more unlikely to be reached. In the case that the value of your collateralized assets against the borrowed assets decreases instead, the health factor is also reduced, causing the risk of liquidation to increase.

Liquidation

​Liquidation occurs when the value of the collateral provided is less than the borrowed funds. Liquidation is designed to ensure excess liquidity for withdrawal and borrowing of funds, protecting lenders against default risk. The current liquidation fee on Molend is 15%. In order to avoid the reduction of your health factor leading to liquidation, you can repay the loan or deposit more assets.