Borrowing against collateral
Borrowing creates an obligation in the borrowed asset. Collateral provides a recovery path if the position breaches its rules.
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THE INTERACTIVE FIELD GUIDE
Watch collateral, debt and liquidation interact.
Move prices and interest, compare oracle and market valuations, then apply a liquidation to both sides of the balance sheet.
Enable JavaScript to use this simulation. Read its assumptions and related explanations below.
READ THE MODEL
Assumptions & scope
- One collateral asset backs one debt asset fixed at one quote unit; simple interest accrues over a 365-day year.
- LTV constrains new borrowing; a separate liquidation threshold determines eligibility.
- One liquidation repays a chosen fraction of debt, capped by collateral available at oracle value plus the modeled bonus.
- Values are teaching parameters, not the current settings of an Aave market; protocol dust rules, fees and asset modes are excluded.
Aave · Health Factor & Liquidations ↗Checked 13 Nov 2026
Understand the moving parts
All labs ↗Collateral and borrowing capacity
Collateral is a recovery asset. Its quantity, market value, liquidity and permitted use all affect how much credit it can support.
Liquidation and bad debt
Liquidation repays debt by transferring collateral. It can begin before insolvency, and it does not guarantee complete recovery.
Oracles and outside information
An oracle brings an external assertion into a blockchain. Consensus over the assertion does not make the outside fact automatically true.
Utilization and interest rates
A pool’s rates coordinate borrowers and suppliers. They change with demand, available liquidity and governance parameters.