Avoiding liquidation

To avoid liquidation a borrower must have a Health Factor above 1. The Health Factor varies on the value of the underlying asset, value of borrowed assets and accrued interest rate. Repaying the loan or depositing more collateral are the two methods available to improve your Health Factor.

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Health Factor

A higher Health Factor gives a user more margin to avoid liquidation and using tools to track variations in price of the underlying assets can help in avoiding liquidations and paying a Liquidation fee.

Please be mindful that all assets fluctuate in price action due to market conditions. For example a stablecoin can depeg in an open market, resulting in fluctuation in USD value (e.g. from 1 USD to 0.99 USD in value) impacting your Health Factor and thus increase the possibility of liquidation.

Reduce the risk of liquidation by repaying any outstanding loans or deposit additional collateral to increase your Health Factor.