⚠️Borrower risks
Last updated
Last updated
Liquidation with oracle is related to a loan Health factor, when the Health factor reaches 1 or below, liquidation can be triggered, and the lender can take part of your collateral.
Upon liquidation lender will receive part of your collateral that will cover the Loan + interest + 1.6% of the collateral as a liquidation fee.
You as a borrower will be able to claim the remaining collateral if any.
Health factor
The Health Factor is the numeric representation of the safety of your deposited assets against the borrowed assets and their underlying value. The higher the value, the safer your funds' state is against a liquidation scenario. If the Health Factor reaches the liquidation threshold, the lender will be able to liquidate the loan.
The Liquidation Threshold is an indicator that determines whether a position is undercollateralized. If the Health Factor reaches 1 or below, the loan is considered undercollateralized, and the lender can trigger a liquidation process.
When creating a loan, wisely choose the loan term as you will have to repay the loan before that term ends. If you fail to repay in time, the lender will have an option to take your whole collateral, no matter how high the Health factor is.
Theoretically, there is the possibility of smart contract failure or exploit. If it happens, you could lose your whole collateral. We are open-source, and our code is audited by VacuumLabs.
