# Liquidations

#### A liquidation is a process that occurs when a borrower's borrow limit goes above 100% due to their collateral value not properly covering their loan/debt value. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other.

In a liquidation, up to 50% of a borrower's collateral can be liquidated or enough to cover the amount that needs to be repaid, whichever is lower.

If the 50% of your collateral being liquidated does not bring your position to health cascading liquidations can take place until it does.

## How much is the liquidation penalty?

The liquidation penalty (or conversely the liquidation bonus for liquidators) depends on the asset used as collateral. You can find every assets' liquidation bonus in the [Market Collateral Factors section.](market-collateral-factors)

Based on a 8% Liquidation penalty, if you borrowed $75 USDC by supplying 100$ worth of ETHW as collateral, and you got liquidated, then you would keep the $75 USDC borrowed and the liquidator would seize $75 worth + 75\*8% of your collateral.

The rest of your collateral is still yours to keep.

## How can I avoid getting liquidated?

To avoid liquidation you will need to reduce your borrow limit. This can be done by either depositing more collateral assets or repaying part of your loan (or both). By default, repayments increase your health factor more than deposits. It's important to monitor your borrow limit and keep it within safe margins to avoid a liquidation. Keeping your borrow limit below 50%, for example, gives you more of a margin to avoid a liquidation.

You should be mindful of the stablecoin price fluctuations due to market conditions and how it might affect your borrow limit. For example, the market price of USDC 1.00 might not equal exactly USD 1.00, but for example USD 0.95. The price fluctuations of stablecoins, like any assets, affects your borrow limit.

Conversely, if you're borrowing highly volatile tokens with ephemeral liquidity, your borrow rates may increase sharply and suddenly which may also increase your risk of liquidations.&#x20;

## Can I participate in the liquidations ecosystem?

Yes, anyone can participate in undertaking liquidations to ensure the health of the system and get the liquidation bonus in return. Normally liquidators develop their own solutions and bots to be the first ones liquidating loans to get the liquidation bonus.

The protocol takes a 2.8% fee from liquidations out of the liquidation bonus which goes towards protocol revenues.
