> For the complete documentation index, see [llms.txt](https://docs.unlockd.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.unlockd.finance/unlockd-v1/protocol-mechanics/liquidations.md).

# Liquidations

A liquidation is a process that is triggered when a borrower's [health factor](broken://pages/yVSNUTDwW36j2nzlv4I5) 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](broken://pages/AbL9rNpckRYbpOb3UMBD) 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](broken://pages/pS4Ff7eXTBQy0mea70VB#repay-the-loan) part of your loan. Due to the impact of LTV, repayments increase your health factor more than deposits.

{% hint style="warning" %}
Depositing more collateral is a feature under development.
{% endhint %}