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If a user expects their current asset to increase in value (going long) or wants to access the value of a stable asset while simultaneously entering a new position with additional capital, they can choose to borrow against the asset supplied in the protocol instead of selling it entirely. This provides the user with liquidity or working capital without the need to liquidate their existing asset.
To enable borrowing, enable supplied asset to be used as collateral
Before borrowing, the user is required to deposit an accepted asset to be used as collateral. Ensure that the "Use as Collateral" tab is enabled in the "Supply" section as shown in the image below:
The borrowing limit is determined by the supplied value and the existing liquidity. If there is insufficient liquidity or the user's Health status does not allow it, they are unable to borrow an asset.
Quick Borrow Flow
- 1.Click on the Dashboard tab on the menu and click on
- 2.Select the type of asset from the drop box menu in the
- 3.Enter the desired amount to borrow and click
- 4.Once the transaction is confirmed, the borrow is successful and it starts accruing payable interest
The Collateral factor differs for each asset, representing the highest possible borrowing amount from the protocol when using that particular asset as collateral.
To access the repayments section, go to the Borrow dashboard and locate the tab labeled "Repayments." Once there, select the option to repay, input the desired amount for repayment, and proceed by confirming the transaction. Please note that repayments can only be made using the same asset that was borrowed.
The repayment period for loans is not set to a fixed duration. Users can borrow for an indefinite period as long as their position remains secure (Health > 1). However, it's important to note that accrued interest can accumulate, potentially decreasing the user's Health and making it more likely for their supplied assets to be liquidated.
To prevent liquidation and maintain a healthy position, users have two options. They can repay the loan in full or supply additional assets to increase their Health. By repaying the loan or adding more assets, users can bolster their position and mitigate the risk of liquidation.