# Liquidations

A liquidation is a process that is triggered when a borrower's [health factor](https://docs.unlockd.finance/unlockd-v1/protocol-mechanics/broken-reference) goes below 1 due to their collateral value not properly covering their loan/debt value. This might happen when the collateral decreases in value or the borrowed debt increases in value against each other.

* **As a lender,** liquidation works essentially like a protection mechanism. The [liquidation threshold](https://docs.unlockd.finance/unlockd-v1/protocol-mechanics/broken-reference) protects lenders from extreme price drops, which could cause under-collateralization followed by liquidation. 
* **As a borrower,** if your collateral value falls closer to your debt value or is unable to support your debt value, after the [Borrower Grace Period](#borrower-grace-period) the protocol will allow someone else to repay your debt in exchange for the collateralized NFT. 

In a liquidation event, the borrower permanently loses ownership of their NFT. To avoid liquidation, you can raise your health factor by depositing more collateral assets or [repaying](https://docs.unlockd.finance/unlockd-v1/protocol-mechanics/broken-reference) part of your loan. Due to the impact of LTV, repayments increase your health factor more than deposits.

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Depositing more collateral is a feature under development.
{% endhint %}