Borrow
Borrowing on the Kinetic protocol allows users to leverage their existing assets without having to sell them. This is especially useful if you expect your asset to increase in value or if you want to access the value of a stable asset while simultaneously taking on a new position.
Step-by-Step Borrowing Process
Enable Collateral:
Before borrowing, deposit an accepted asset into Kinetic.
Ensure the "Use as Collateral" option is enabled in the "Supply" section. This makes your supplied asset available to secure your borrowings.
Set Borrowing Limit:
Your borrowing limit is determined by the value of your supplied assets and the protocol's liquidity. Insufficient liquidity or a low Health status may prevent borrowing.
Initiate Borrowing:
Navigate to the Supply & Borrow tab and then click on "Borrow."
Select the type of asset you want to borrow from the dropdown menu.
Enter the desired amount to borrow and click "Borrow."
Once the transaction is confirmed, your borrow is successful, and interest will start accruing immediately.
Understanding Collateral Factor:
Each asset has a different collateral factor, which represents the maximum amount you can borrow against it. It's crucial to understand these factors to manage your borrowings effectively.
Managing Borrowed Assets
Health Factor:
The Health factor is a real-time indicator of the safety of your loan position. It fluctuates with market conditions and the value of your collateral.
Keeping your Health factor above 1 ensures that your position remains secure. Falling below this threshold increases the risk of liquidation.
Repayments:
Go to the Dashboard and underneath the "My Assets" section you will see your borrowed assets and the option to Repay.
Select the asset to repay, enter the amount, and confirm the transaction.
Repayments must be made in the same asset that was borrowed.
Repayment Flexibility:
There is no fixed repayment period. You can borrow for as long as your Health factor remains above 1.
Monitor accrued interest as it can reduce your Health factor, potentially leading to liquidation if not managed.
Preventing Liquidation:
Repay part or all of your loan to reduce the borrowed amount.
Supply additional assets to increase your collateral and improve your Health factor.
By understanding these steps and actively managing your loan positions, you can effectively utilize Kinetic's borrowing features to enhance your financial strategies while maintaining the security of your assets.
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