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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.