GlossaryAdvanced
Collateral Factor
The percentage of a deposited asset's value a lending protocol allows to be borrowed against.
A collateral factor is the percentage of a deposited asset's value that a lending protocol allows a user to borrow against — for example, an 80% collateral factor on a $1,000 deposit would allow borrowing up to $800 of value.
More volatile assets generally receive a lower collateral factor, reflecting their greater price-risk as collateral.
Examples
- A stablecoin typically has a higher collateral factor than a more volatile token.
- A lower collateral factor means less can be borrowed against the same deposited value.