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Borrowing

How to create a loan request

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As already mentioned, the CREATE LOAN REQUEST button is at the top right corner of the loan request menu in the Market tab. By hitting the button, a pop-out window opens, allowing users to create a loan request with fully customizable parameters. Here are the key specifications of every loan request:
Step 1: Loan details. The user has to the token and the amount he wants to borrow.
Step 2: Interest details. The user must fill in the loan term parameters in days and hours. The dApp will then suggest a feasible Interest to ensure the loan is healthy. The Interest is payable in ADA or AADA. The specified amount is paid when the Borrower (who created the Loan request) returns the loan.
Step 3: Collateral. The user sets the desired Collateral amount (in ADA). The dApp provides a recommended amount for greater ease of use.
Step 4: Confirmation window. The user can double-check the Loan request parameters. When ready, the user can press the Confirm button and trigger the wallet pop-up to sign the transaction.
  • Loan – The user has to select an asset from the list and enter the desired amount to be borrowed;
  • Collateral – The user has to provide ADA or AADA as collateral; the amount is due to cover any loss in case of payment failure on the borrower's part and loan liquidation by the lender;
  • Interest - The amount to be paid out on top of the loan when the borrower repays the sum;
  • Term - The duration of the loan.
When the user enters all the information, the app will estimate the Health factor, indicating whether the loan is healthy or not. Keep in mind that you cannot submit loan requests with a Health factor below 1. On the other hand, orders with a higher Health factor are more likely to find lenders.
Keep in mind that if the Health factor falls below 1.0, it will be removed from the market page. In turn, it will show up in the Dashboard with the Withdraw option.
A smart tip: When submitting a Loan request, offering higher APY will increase the chances of finding a Lender.
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After confirming your Loan request, your Collateral will be deposited into a smart contract. Once on-chain, your loan request will be visible on the Market and Dashboard pages.
When you find a Lender, you will receive a β€œB” token called an NFT Bond. Remember to keep this token to repay the loan.

Canceling a loan request

Users can cancel non-funded loan requests on the Dashboard page by clicking the Cancel button on the desired request. After canceling the loan request, it is removed from the Markets page. The collateral is withdrawn from the smart contract and returned to the user's wallet.
FAQ:
  1. 1.
    When can I cancel my loan request? You can cancel a loan request anytime before it gets supplied by a lender.
  2. 2.
    How much does canceling a loan request cost? Canceling a loan request triggers a standard network transaction that charges fees of around 1 ADA.
  3. 3.
    How do I cancel my loan request? Canceling a loan requires the borrower to provide the underlying B NFT bond, which is mandatory to execute the transaction.
  4. 4.
    Can someone else cancel my loan request? The loan can be canceled by whoever holds the borrower’s NFT. The same person is also eligible to claim the collateral.

How to claim collateral from a liquidated loan

When the Health factor reaches the liquidation threshold, the user can claim a portion of the liquidated collateral. The claimable amount depends on the Health factor during the loan liquidation.
You can claim the leftover collateral by navigating to the Dashboard β†’ Liquidated loans page. Clicking on the button will initiate a transaction requiring you to pay standard transaction fees and provide the NFT bond.

Repaying the loan

The borrower has to return the loan plus interest before the deadline. To repay your debt, click the Repay button on the Dashboard window, which will trigger a transaction in your wallet. Keep in mind that you must provide the loan, the interest, and the NFT bond.
Disclaimer: Returning a loan earlier than its term will decrease the interest payment.
Example: If the loan term is 5 days, and the interest is 5 ADA, returning the loan after 3 days will reduce the interest to 3 ADA.

Risks associated with borrowing

As a borrower, you will be exposed to two types of liquidation risk:
  • Oracle liquidation - When the Health Factor reaches the Liquidation Threshold or decreases further, the Lender can choose to liquidate a loan and claim the Collateral.
  • Standard liquidation - When the Borrower fails to meet the loan deadline, the Lender can claim the entire Collateral.
Last modified 15d ago
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On this page
How to create a loan request
Canceling a loan request
How to claim collateral from a liquidated loan
Repaying the loan
Risks associated with borrowing