Avior Protocol: Barrow
Avior Protocol connects lenders and borrowers across the world using smart contracts.
Barrow
What is a Collateralized Loan?
It enables you to borrow assets (e.g. VIO, VIOD) against the collateral (e.g. SOL) that you lock up in the Loan until you pay back the assets (e.g. VIO, USDA) you generated.
What are the benefits of opening a Collateralized Loan?
You can get liquidity by borrowing the assets (e.g. VIO, USDA- Avior Stablecoin) without giving up ownership of your collateral (as long as you make sure that the Loan holds enough collateral to cover the value of the debt).
How does it work?
First, determine how much collateral (e.g. #CRO) you want to lock up in a Collateralized Loan. Then, you can borrow the assets (e.g. VIO, VIOD) against the collateral you locked up, and spend them as you wish. Pay back your loan (e.g. VIO, VIOD) when you no longer need the liquidity, together with interest accrued. Paying back your loan allows you to withdraw the collateral you locked up.
What is Utilization Ratio?
The ratio of your debt to your credit limit. The ratio can be either Safe or Risky and it depends on the protocol and the collateral type. You can check the Utilization Ratio by clicking on your Collateralized Loan position in Zerion interface.
Is there any risk involved in creating a Collateralized Loan?
As long as you monitor your Loan and make sure that your Utilization Ratio stays Safe, your Loan will not be liquidated. If your Utilization Ratio is risky you can add more collateral, or pay back some of the debt. If the Utilization Ratio becomes risky then your Loan will be liquidated. This means that your collateral is being sold by the system in order to cover the value of the assets (e.g. VIO, VIOD) that you generated. Any leftover collateral is returned to your Loan so you can withdraw it.
Does it cost anything?
Your Collateralized Loan continuously accrues interest fees that depend on the collateral type and the protocol that you choose. If your Loan gets liquidated, then there is a liquidation penalty that depends on the protocol (e.g. 10%) and it will be subtracted when the locked collateral is sold.
