How liquidation works with Stableloans

By now, we all know how beneficial crypto and stablecoin loans are. You can get super fast approval, and you don’t have to worry about your credit score or providing an excessive amount of information.

However, there is a major downside, which all boils down to crypto’s volatility. If you take out a loan in cryptocurrency, there’s always going to be the risk of its value decreasing. On the other hand, if you’re using your crypto as collateral, you’re faced with the risk of losing your assets to liquidation if its value declines.

Luckily, with our Stableloans feature, you can easily borrow a line of stablecoin credit with minimal risk. This means we won’t immediately sell your assets if your collateral value declines, and we will always keep you in the loop about your LTV level.

But let’s start from the beginning - what is liquidation, what does LTV mean and what makes Stableloans different from other protocols out there?

What is liquidation?

First, let’s look into what liquidation is. With a traditional loan, liquidation refers to selling your collateral in the event that you’re unable to repay your loan. 

This concept is similar in the DeFi world, but with the prime focus being on volatility. As a borrower, if your collateral’s value falls below to a point where it’s unable to support your loan value, your assets will be sold off.

What is loan-to-value?

Loan-to-value (LTV) is a ratio that shows the percentage of your collateral value that you borrow against. Depending on your collateral’s value, your LTV ratio will either increase or decrease. For instance, if your collateral’s value declines, your LTV will rise, which in turn increases risk of liquidation.

To avoid assets being liquidated, borrowers often add more collateral to their loan in order to bring their LTV down. This in turn minimises the risk of liquidation.

What makes Stableloans different from other protocols?

Unlike other protocols, we won’t liquidate your assets immediately if your LTV increases. Instead, if your LTV reaches a certain level, we’ll let you know so that you will have the chance to add more collateral. Here’s a few more details on how it works:

  • If your LTV reaches 60%, we will ask you to add more collateral to your Stableloan.

  • If your LTV reaches 70%, we will ask you to add more collateral to your Stableloan. You will need to take action quickly, or your collateral may be liquidated.

  • If your LTV reaches 80%, we will need to liquidate part of your assets. At this point, you will need to either add more collateral or repay part of your Stableloan.

Take control with a Stableloan!

Stableloans let you access a line of stablecoin credit including USDT, USDC and EURT. Plus, you can choose how much you want to borrow and for how long, and you’ll only have to pay a single monthly interest payment. Give it a go today!