# How does it work?

<figure><img src="https://1021446076-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MbJ318ByJ_1XAqFUzX5%2Fuploads%2FpSgHL2XvZ4gR0wmdSvy9%2FV1%20txs.png?alt=media&#x26;token=ba8ee3d7-5748-4e0c-935c-58129e017748" alt=""><figcaption><p>A full walkthrough of the V1 protocol </p></figcaption></figure>

**Liquidity Request** - The **Borrower** creates a **Liquidity Request** with custom parameters such as **Collateral**, **Interest**, **Term**, and type of asset to be borrowed.

The **Borrower** can cancel the request before it is funded.

**Funding the request** - The **Lender** can select a request using the integrated filters.

**Liquidity Desposit** - The **Lender** creates a **Liquidity Deposit** with custom parameters such as **Collateral, Interest, Term**, and **type of asset** on offer.

The **Lender** can cancel the **Lender request** before it is funded.

**Finding a Borrower** - Every **Borrower** can select a deposit to take using the integrated filters.

**Interim period** - The **Borrower** must return the loan + interest before the loan deadline. In the event of failure, the Lender can liquidate the loan and receive the **Collateral** as compensation.

**Post-loan scenarios:**

* The **Borrower** successfully repays the loan, and the Lender claims his **assets + accumulated interest.**&#x20;
* The **Borrower** fails to repay the loan on time, and the **Lender** triggers a liquidation.

Every loan is secured by a **Health Factor** solution implemented to protect lenders against dramatic drops in collateral value. Whenever the **Liquidation Threshold** falls below 1.00, the **Lender** can manually liquidate the loan using the [**Liquidation Oracle**](https://lenfi.gitbook.io/docs/lenfi-v1-protocol/lenfi-p2p-aada-v1/liquidation-oracle).