Risks

Are there any risks involved with Flexible Loan?

As with any loan product, there are risks. Market fluctuations can affect the value of your borrowed or collateralized assets. That’s why at AID we encourage good loan and risk management, so that you can avoid liquidation and repay your loans in a timely manner.

What is LTV and how is it calculated?

Loan-to-Value ratio or LTV is the value of your loan divided by the value of your collateral and is shown as a percentage. The lower your LTV, the better. Maintaining a healthy LTV is the most important aspect of loan risk management.

What happens if my loan gets liquidated?

If your loan gets liquidated, you’ll lose access to your collateral and any repayments made so far. It occurs when your loan hits the liquidation LTV.

How is liquidation LTV calculated?

Liquidation LTV = (Collateral Value × Discount Rate – Loan Value × Maintenance Margin Rate – Liquidation Fee) / Collateral Value. Each crypto has a different discount rate which affects Liquidation LTV.

What is a margin call?

Margin calls serve as a warning that your loan position is getting close to the liquidation LTV. After a margin call, you should either deposit more collateral or repay some of your loan to reduce the LTV.

Will I be notified of any margin call and liquidation events?

Yes, through email, app and push notifications.

What is forced repayment and how does it work?

Forced repayment occurs when our platform’s borrowing limit for a specific crypto has been exceeded. In such cases, our system will automatically sell the crypto you’ve used as collateral to repay the loan, ensuring that the borrowing ratio returns to a safe level. For example, if our platform’s borrowing limit for ETH is 100,000 but the total amount borrowed by loan users reaches 150,000. If you’ve used BTC as collateral to borrow ETH, we’ll sell your BTC to buy more ETH and settle your loan.

What are discount rates and how do they affect liquidation LTV?

Discount rates are used in the liquidation LTV formula. Cryptos with higher discount rates will have higher liquidation LTVs. Pledging large amounts of a single-type of crypto as collateral can also affect discount rates.