# Borrowers

Selling your assets means losing the potential upside value gain, triggering a capital gains tax event. By depositing your assets as collateral, you are able to obtain liquidity (working capital) without selling your assets, not incurring capital gains taxes.&#x20;

## The Role of the Unlockd Account in Borrowing

The process begins with your Unlockd Account, a unique feature that acts as the hub for all your transactional activities on the platform. When you're ready to borrow:

1. **Deposit Your RWAs**: Transfer one or multiple assets from eligible [tokenizing partners](/unlockd-at-a-glance/supported-rwas.md) into your Unlockd Account. This account, a multi-signature wallet, assesses the value of your assets, setting the stage for your borrowing capacity.
2. **Assessment and Valuation**: Unlockd's system instantly evaluates your assets, considering factors like market demand, rarity, and other intrinsic qualities. This valuation, in conjunction with the Loan-To-Value (LTV) calculations, determines how much you can borrow against these assets.

To learn all the details, check the following section:

{% content-ref url="/pages/hY5bGYJ1oWfei6bjLpi5" %}
[Unlockd Account](/protocol-mechanics/unlockd-account.md)
{% endcontent-ref %}

{% hint style="success" %}
Borrowing against your assets in Unlockd, rather than selling them, can offer significant tax advantages. This strategy allows you to access liquidity while potentially deferring capital gains taxes that would be incurred from an outright sale, optimizing your tax situation.
{% endhint %}

## Bundle up to 100 RWAs in a single loan

One of the standout features of Unlockd V2 is the ability to use multiple assets as collateral for a single loan. This flexibility allows you to maximize your borrowing power and diversify the risk associated with individual asset volatility.

Learn more here:

{% content-ref url="/pages/cHqtyVKDeqbaRReMlO0m" %}
[Multi-Asset Collateral](/protocol-mechanics/multi-asset-collateral.md)
{% endcontent-ref %}

## Initiating a Loan

When it's time to borrow, the process is streamlined for ease and efficiency:

* **Selecting Assets**: In the 'Borrow' section, choose the currency you wish to borrow against your asset. Currently only USDC is available to borrow.
* **Determining Loan Amounts**: The platform guides you in setting the amount based on the collective value and LTV of your deposited assets. The innovative Dynamic LTV model calculates how much you can borrow against your assets. This model adapts to market conditions and the specific attributes of your asset, ensuring a borrowing limit that's both realistic and advantageous.

{% content-ref url="/pages/o6gbQNoiDGjMduU2KRsU" %}
[Dynamic Loan-To-Value](/protocol-mechanics/dynamic-loan-to-value.md)
{% endcontent-ref %}

## Keeping Custody and Ownership

Unlockd V2's 'Keep Custody & Ownership' feature ensures you retain full custody and ownership of your RWAs while they serve as collateral. This aids in complying with KYC regulations and maintaining transparent, verifiable ownership.

You also retain access to your assets' utilities, such as token-gated events, on-chain activities, airdrops, and staking rewards.

{% content-ref url="/pages/SYi9MrjG5zBmCdzMbOtR" %}
[Keep Custody & Ownership](/protocol-mechanics/keep-custody-and-ownership.md)
{% endcontent-ref %}

## Managing and Repaying Your Loan

With no fixed repayment period, Unlockd offers unparalleled flexibility in loan management.&#x20;

You have to repay the loan in the same asset type, along with the accrued interest, at your convenience. For example, if you borrow 1000 USDC you will pay back 1000 USDC + interest accrued.&#x20;

While the supply and demand ratio of the asset influences borrowing rates, the primary driver is actually the utilization rate of available lending pools. As more assets are borrowed without corresponding deposits, the rate climbs due to increased demand on a limited resource.

As long as your position is safe, you can borrow for an undefined period. However, as time passes, the accrued interest will grow, making your health factor decrease, which might result in your deposited assets becoming more likely to be liquidated.

## Avoid being liquidated

Maintaining the health of your loan is crucial to avoid liquidation. Liquidation occurs when the value of your collateral falls below a certain threshold, known as the Health Factor. This typically happens due to market volatility or a decline in the value of your asset collateral.&#x20;

#### Monitoring the Health Factor

* **Stay Informed**: Regularly monitor your Loan Health Factor within the Unlockd platform. A drop below the critical threshold indicates an increased risk of liquidation.
* **Alerts and Notifications**: Set up notifications in the Unlockd system to receive alerts if your Loan Health Factor approaches dangerous levels.

{% content-ref url="/pages/y4FGdFEgFoEE7PnhYrGX" %}
[Notifications](/protocol-mechanics/notifications.md)
{% endcontent-ref %}

#### Proactive Loan Management Strategies

* **Partial or Full Repayment**: One of the most direct ways to improve your Loan Health Factor is by repaying part or all of your loan. This reduces the outstanding amount and consequently improves the health of your loan.
* **Adding Collateral**: You can deposit additional assets as collateral to bolster your Loan Health Factor. This is particularly effective if you have assets that have retained or increased in value.

#### Understanding the Liquidation Process

* **Borrower Grace Period**: In the event your loan becomes unhealthy, Unlockd provides a grace period for you to take action and rectify your loan status before the liquidation is actually executed.

{% content-ref url="/pages/KnfGOWW1ePf0SXwAA2Oi" %}
[Borrower Grace Period](/protocol-mechanics/liquidations/borrower-grace-period.md)
{% endcontent-ref %}

* **Liquidation Mechanics**: If liquidation is initiated, Unlockd employs a smart liquidation system designed to minimize asset loss, first with a Liquidation Auction in the Marketplace and, if necessary, using a third-party protocol known as a External Liquidation Gateway.

{% content-ref url="/pages/J90JjSoo8zQTcRKhdhAO" %}
[Liquidations](/protocol-mechanics/liquidations.md)
{% endcontent-ref %}

## Full loan terms and characteristics

{% content-ref url="/pages/qkwkvEjRsm4V9vcdNUvN" %}
[Loan characteristics](/protocol-mechanics/loan-characteristics.md)
{% endcontent-ref %}

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