Collateral & Liquidation
Collateral determines borrowing capacity and position safety. Understanding LTV and Health Factor is essential before opening a leveraged LayerBank position.
Max LTV (Loan-to-Value)
Max LTV defines the maximum borrowing capacity assigned to an eligible collateral asset. A higher LTV allows more borrowing against the same collateral value, but it also leaves less room for adverse price movement.
Borrow Limit
When multiple collateral assets are used, borrowing capacity is based on their values and market-specific risk parameters. A change in price, LTV configuration or debt can change the amount of available borrowing capacity.
Health Factor
Health Factor summarizes the relationship between allowed borrow capacity and current debt.
- Above 1: the position remains below its maximum borrowing threshold.
- Near 1: the position has little safety margin.
- Below 1: the position can become eligible for liquidation, depending on deployment rules.
Liquidation Process
Liquidation reduces unhealthy debt by allowing liquidation logic or liquidators to repay debt in exchange for collateral under the deployment's configured rules. The exact close factor, bonus and threshold are market parameters and may differ across versions and networks.
How to Reduce Liquidation Risk
- Keep a buffer above the minimum health threshold.
- Avoid borrowing at the maximum available LTV.
- Monitor both collateral price and borrow APR.
- Repay debt or add collateral when the position becomes less healthy.
Frequently Asked Questions
What is Max LTV on LayerBank?
Max LTV is the maximum borrowing capacity assigned to collateral. The exact percentage depends on the asset, network and risk configuration.
What happens when Health Factor falls too low?
The position can become eligible for liquidation according to the deployment's configured threshold and liquidation rules.
How can I reduce liquidation risk?
Use less than the maximum borrow capacity, maintain a collateral buffer and monitor both prices and debt frequently.
Reviewed for layerbank.trade on November 2, 2026.