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Borrowing

Why borrow?

A user may want exposure on their current asset appreciating (going long) while looking to enter another position with additional capital.
As a result, the user would be able to borrow, using the current asset being deposited in the protocol instead of fully selling it off. This provides the user liquidity (working capital) without the need to sell their current asset.
Example:
Satoshi requires additional liquidity to enter a new position but does not want to sell his $AVAX tokens as he expects his AVAX tokens to increase in value.
He may do the following:
  1. 1.
    Deposit AVAX into the BENQI protocol as collateral
  2. 2.
    Borrow USDt using his AVAX as collateral
  3. 3.
    Uses the borrowed USDt to enter his desired positions

Borrowing

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 maximum amount that can be borrowed depends on the value deposited and the available liquidity. The user cannot borrow an asset if there is not enough liquidity or if their Health doesn’t permit them to.

Borrowing Assets

  1. 1.
    Click on the Markets tab on the menu and click on Borrow
  2. 2.
    Select the type of asset from the drop box menu in the Borrow dashboard
  3. 3.
    Enter the desired amount to borrow and click Borrow
  4. 4.
    Once the transaction is confirmed, the borrow is successful and it starts accruing payable interest

Collateral factor

The Collateral factor varies across each asset. It is the maximum amount that can be borrowed from the protocol using this specific asset as collateral.

Repayments

The repayments tab is located under the Borrow dashboard. Click on Repay, enter your desired amount to repay and confirm your transaction.
Repayments are only able to be done with the same asset borrowed

Time period for loan repayments

There is no fixed period to repay loans.
As long as the user's position is safe (Health > 1), borrowing can be done for an undefined period. However, accrued interest may grow causing the user's Health to decrease which might result in deposited assets becoming more likely to be liquidated.

Avoiding liquidation

In order to avoid the reduction of the user's Health leading to liquidation, the user can repay the loan or deposit more assets in order to increase their Health .
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