GlossaryAdvanced
Health Factor
A ratio showing how close a lending position is to liquidation.
A health factor is a numeric ratio, used by many lending protocols, expressing how much a position's collateral value could fall before it becomes eligible for liquidation — generally, a health factor at or below a protocol-defined threshold (often 1) triggers liquidation.
Monitoring a position's health factor, and adding collateral or repaying debt if it falls, is a practical way to avoid an unwanted liquidation.
Examples
- A health factor well above 1 generally indicates a position has a meaningful buffer before liquidation risk.
- A falling health factor is a signal to add collateral or reduce borrowed amount.