Common questions about borrowing on Moonwell.
What is the collateral factor?
The collateral factor is the maximum percentage of an asset's value that you can borrow against. Each asset has a different collateral factor, set by Moonwell governance based on its risk.
For example, an asset with an 80% collateral factor means you can borrow $0.80 for every $1.00 you supply of that asset.
Can I borrow without collateral?
No. You must supply assets to Moonwell first and enable them as collateral before you can borrow. There's no uncollateralized borrowing on Moonwell.
How much can I borrow?
Up to your credit limit, which is the sum of each supplied asset's value times its collateral factor. Borrowing the full amount leaves no buffer, so most people borrow well below it.
What happens during liquidation?
When your credit remaining reaches zero, a liquidator can:
Repay part of your borrowed debt (up to 50% in a single event).
Seize your collateral at a 10% discount (7% to the liquidator, 3% to the protocol).
You lose collateral, and the liquidator profits. This is why avoiding liquidation is critical.
How do I increase my borrowing power?
Supply more assets and enable them as collateral. The more collateral you have, the more you can borrow. You can also note the collateral factors set by governance, since higher factors on your supplied assets increase your borrowing power.
Is there a minimum borrow amount?
There's no set minimum. However, gas fees apply to all transactions, so very small borrows may not be practical.
Can I borrow the same asset I supplied?
Technically yes, but it isn't economically beneficial. You'd earn supply interest on the asset while paying borrow interest on it, and the borrow rate is typically higher, so you'd lose money.
How is borrow interest calculated?
Borrow interest accrues per block based on the market's utilization rate.
Higher utilization (more of the asset is borrowed) means higher borrow rates.
Lower utilization (less borrowed) means lower borrow rates.
The rate changes dynamically as conditions change. You can see current rates on the relevant market page before you borrow.
What if prices change while I'm borrowing?
Price changes affect your credit remaining. If collateral prices fall, your credit limit drops. If borrowed asset prices rise, your borrowed value increases. Both reduce your credit remaining.
Watch your positions closely. If prices move significantly, repay loans or add collateral to stay safe from liquidation.
Can I borrow multiple assets?
Yes. You can borrow as many different assets as you want, as long as you have enough credit remaining to cover each borrow.
How often should I check my position?
Check regularly, especially in volatile markets. Set up alerts or reminders to monitor your credit remaining. If it drops below 20%, consider taking action.