Borrowing

Why borrow assets?

Users borrow assets for many reasons. If you're long on a collateral asset, you can supply it and borrow stablecoins such as $USW so you don't have you sell. You could also buy more of the asset you're long on with your borrowed stablecoins to leverage your position. Another reason for borrowing a particular asset is if there is some kind of strategy you can execute which allows you to earn more yield than you could otherwise. And finally, you may borrow an asset because you believe it is over valued and you have a short strategy which you believe will net you some gain.

How do I borrow?

Before borrowing from the PaperDAO Money Market you will need to deposit collateral assets to the protocol to act as your collateral. You can view the list of collateral assets and their collateral factors in the Market Collateral Factors section. After this, simply head to the Borrow Market and click on “Borrow” for the asset you want to borrow. Set the amount you need based on your available deposits that would be used as a collateral for the loan.

How much I can borrow?

The maximum amount you can borrow depends on the value you have deposited, its collateral factor, and the available liquidity. For example, you can’t borrow an asset if there is not enough liquidity or if your health factor doesn’t allow you to.

What asset do I need to repay?

You repay your loan in the same asset you borrowed. For example, if you borrow 1 ETHW you will pay back 1 ETHW + any interest accrued. If you want to pay back the loan based on USD price you can borrow any of the available stable coins in the market.

How much would I pay in interest?

The interest rate you pay for borrowing assets depends on the borrowing rate which is derived from the supply and demand ratio of the asset. Moreover, the interest rate of a variable rate changes constantly. You can find your current borrowing rate at any time in the Borrowings section of your dashboard.

What is the borrow limit?

The borrow limit is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The lower the value is, the safer the state of your funds are against a liquidation scenario. If the borrow limit exceeds 100%, the liquidation of your deposits will be triggered. Any borrow limit at and above 100% can get liquidated.

What happens when my health factor is reduced?

Depending on the value fluctuation of your deposits, the borrow limit will increase or decrease. If your borrow limit decreases, it will improve your borrow position by making the liquidation threshold more unlikely to be reached. In the case that the value of your collateralised assets against the borrowed assets decreases instead, the borrow limit is also increased, causing the risk of liquidation to increase.

When do I need to pay back the loan?

There is no fixed time period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow making your borrow limit increase, which might result in your deposited assets becoming more likely to be liquidated.

How do I payback the loan?

In order to payback the loan you simply go to the Borrowings section of your dashboard and click on the repay button for the asset you borrowed and want to repay. Select the amount to pay back and confirm the transaction.

How do I avoid liquidation?

In order to avoid the increase of your borrow limit leading to liquidation, you can repay the loan or deposit more assets in order to decrease your borrow limit. Out of these two available options, repaying the loan would decrease your borrow limit more. Read more in the Liquidations section.