When you borrow on a money market such as Aave, Kamino, Jupiter Lend or NAVI, you lock collateral and take a loan against it. The health factor is one number that says how far that loan is from liquidation: above 1 you are safe, at 1 the protocol starts selling your collateral to repay the debt, with a penalty.

The formula

Health factor = (value of collateral × liquidation threshold) ÷ value of debt. Each asset has its own liquidation threshold, for example 80% for a stablecoin or 65% for a volatile token. If you supply $1,000 of ETH with an 80% threshold and borrow $400 of USDC, the health factor is 1,000 × 0.80 ÷ 400 = 2.0.

Two things move it: the price of what you supplied (falls → health falls) and the price of what you borrowed (rises → health falls). Interest on the debt lowers it slowly every day.

What the numbers mean in practice

Above 2: comfortable. A 50% drop in collateral value is needed before liquidation.
1.5 to 2: watch it when markets move fast.
1.1 to 1.5: risky; a normal bad day can liquidate you.
Below 1.05: Soheil will not build a transaction that leaves a loan this close to the line, and it asks you to acknowledge the risk below 2.

Max LTV versus liquidation threshold

Max LTV is how much you may borrow when you open the loan; the liquidation threshold, a little higher, is where it gets closed. The gap is your buffer. Borrowing right up to the max LTV means the buffer is only that gap.

Keeping it safe

Borrow stablecoins against volatile collateral only with a wide margin, or borrow the same kind of asset you supplied so both sides move together.
Repay part of the debt or add collateral when the factor approaches 1.5; both are one click on the Lend page, which shows the health before and after every action.
Remember that liquidation is not just losing the margin: the penalty (often 5–10% of the repaid debt) goes to the liquidator.

Do it

More guides

Information, not financial advice. Soheil.fi is non-custodial; every transaction is signed in your own wallet.