> For the complete documentation index, see [llms.txt](https://docs.kinetic.market/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.kinetic.market/security-and-risk-management/health-factor.md).

# Health Factor

## Your Health Factor

To manage risks effectively, Kinetic advises users to monitor their loan's health factors closely. Borrowers should be proactive in managing their positions and consider repaying or depositing additional assets if their health factor declines. Staying informed about blockchain developments and the assets used as collateral can help users make informed decisions.

### How Health Factor is Calculated

The **Health Factor (HF)** measures how safe a user's borrowed funds are compared to their supplied collateral. The formula is:

<figure><img src="/files/dpMJeapZNCnQumzZbvYC" alt=""><figcaption></figcaption></figure>

**Important:** Each asset has a **Collateral Factor**, meaning only a percentage of its value counts toward your borrowing power.

**Example Calculation:**

* **Collateral Factor:**
  * sFLR: **70%**
  * USDC: **80%**
* **User Supplied Assets:**
  * sFLR: **$2,000**
  * USDC: **$1,500**
  * **Total Collateral:** **$3,500**
* **Borrow Limit Calculation:**

<div align="center" data-full-width="false"><figure><img src="/files/0S22HQPlu6PbF33of3AI" alt="" width="375"><figcaption></figcaption></figure></div>

* **User’s Actual Borrow: $1,500**
* **Health Factor Calculation:**

<figure><img src="/files/ByjuZoYRA8DhgnP6BXM1" alt="" width="113"><figcaption></figcaption></figure>

If a user's **Health Factor drops to 1**, they risk **liquidation**. In this example, that happens when their borrow amount reaches **$2,600**.

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