Borrower Grace Period

In Unlockd's commitment to a fair and supportive borrowing environment, the Borrower Grace Period plays a vital role. This period is a key protective measure, offering borrowers a significant window to address and rectify potential liquidation scenarios, with the duration varying based on the type of collateralized asset.

Grace Period Duration

The Borrower Grace Period is initiated the moment a loan's liquidation is triggered.

Its primary purpose is to provide borrowers with a fair chance to respond and take necessary actions to protect their collateralized assets. During this critical timeframe, the auction for the collateralized assets opens, but borrowers retain the power to avert the loss of their assets.

Asset type	Duration
Real-World Assets	7 days
Financial Assets	Coming soon...

These grace period durations are subject to change as Unlockd encounters real-market scenarios and gathers more data on the optimal timeframes for different asset types. Stay informed about any updates to these policies through our platform announcements.

Actions for Borrowers during the Grace Period

When facing potential liquidation, borrowers are not necessarily required to repay the entire debt to halt the process. Instead, the focus is on restoring the loan's Health Factor above 1. To achieve this, borrowers can:

• Repay Partially: Make a partial repayment sufficient to bring the Health Factor back over one, plus any applicable fees or fines (the Critical Recovery Threshold). These additional costs are implemented to compensate bidders for their gas expenses during the auction.

• Asset Management: Assess and adjust your loan strategy, potentially adding more collateral if feasible, to improve your Health Factor.

Critical Recovery Threshold (CRT)

The 'Critical Recovery Threshold' (CRT) is a key term in Unlockd's liquidation process, referring to the minimum amount of debt that must be recovered to elevate the Health Factor (HF) above 1 and prevent loan liquidation.

The Borrower Grace Period is a crucial component of Unlockd's liquidation process, emphasizing our dedication to fair lending and borrower empowerment. By offering this substantial window, we ensure borrowers have the opportunity to take corrective actions, thereby mitigating the risk of losing their valuable assets.