How to Monitor Your Loan Health on Borrow

How to Monitor Your Loan Health on Borrow

When you borrow against your Bitcoin on Borrow by Sats Terminal, monitoring your loan health is one of the most important ongoing responsibilities you have as a borrower. Unlike a traditional bank loan with fixed monthly payments, a crypto-backed loan is affected by real-time market movements. The value of your BTC collateral fluctuates constantly, and those fluctuations directly impact the safety of your position.

This guide explains what loan health means, which metrics to watch, how to use the Borrow dashboard effectively, and what actions to take when your loan health changes.

What Is Loan Health?

Loan health is a measure of how safe your borrowing position is at any given moment. It answers a simple question: "How close am I to being liquidated?"

A healthy loan has plenty of collateral backing the borrowed amount. An unhealthy loan has collateral that barely covers — or no longer covers — the debt. The transition from healthy to unhealthy typically happens when the market price of your collateral drops significantly.

The Key Metrics

There are several interconnected metrics that together paint a complete picture of your loan health:

1. Loan-to-Value Ratio (LTV) — The percentage of your collateral's value that is currently borrowed. A lower LTV means a healthier loan.
2. Health Factor — A numerical score that represents how far you are from liquidation. A health factor above 1 means you are safe; below 1 means liquidation can be triggered.
3. Collateral Value — The current market value of your deposited BTC.
4. Outstanding Balance — The total amount you owe, including accrued interest.
5. Accrued Interest — The interest that has accumulated on your loan since it was opened or since your last payment.

Understanding the Loan-to-Value Ratio

The loan-to-value ratio is the single most important metric for understanding your loan health. It is calculated as:

LTV = (Outstanding Debt / Collateral Value) x 100

Example

Suppose you deposited 1 BTC as collateral when Bitcoin was priced at $60,000. You borrowed $30,000 in stablecoins. Your initial LTV would be:

LTV = ($30,000 / $60,000) x 100 = 50%

Now imagine Bitcoin drops to $45,000. Your LTV becomes:

LTV = ($30,000 / $45,000) x 100 = 66.7%

Your debt has not changed, but your collateral is worth less, so your LTV has risen. If Bitcoin were to drop further to $37,500:

LTV = ($30,000 / $37,500) x 100 = 80%

At this point, you may be approaching the liquidation threshold, depending on the protocol parameters.

What Is a Safe LTV?

There is no one-size-fits-all answer, but here are general guidelines:

Keep in mind that liquidation thresholds vary by protocol, but most are set between 75% and 85%. Operating well below this threshold gives you room to react if prices move against you.

Understanding Health Factor

The health factor is a related but slightly different metric. While LTV tells you the ratio of debt to collateral, the health factor tells you how close you are to the liquidation threshold specifically.

A health factor of 1.0 means you are right at the liquidation line. A health factor of 2.0 means your collateral would need to lose half its value (relative to your debt) before liquidation occurs. The higher the health factor, the safer your position.

How to Interpret Health Factor

• Above 2.0 — Your position is very safe. You have significant buffer.
• 1.5 - 2.0 — Healthy position, but worth monitoring regularly.
• 1.1 - 1.5 — Caution zone. Consider adding collateral or making a partial repayment.
• Below 1.1 — Danger zone. Take immediate action to improve your position.
• Below 1.0 — Liquidation can be triggered at any time.

Using the Borrow Dashboard

The Borrow dashboard is your command center for monitoring loan health. It provides real-time data on every aspect of your position. Here is how to make the most of it.

Dashboard Overview

When you log in, the dashboard presents a clear summary of your active loan(s). At a glance, you can see:

• Current LTV — displayed prominently with visual indicators (green for safe, yellow for caution, red for danger)
• Collateral value — the real-time market value of your deposited BTC
• Outstanding balance — your total debt including accrued interest
• Accrued interest — how much interest has built up on your position
• Health factor — your numerical distance from liquidation

Reading the Visual Indicators

Borrow uses color-coded indicators to make loan health immediately understandable:

• Green — Your position is healthy and well-collateralized
• Yellow/Orange — Your position is entering a zone that requires attention
• Red — Your position is at elevated risk and you should consider taking action

These visual cues help you assess your situation quickly without needing to calculate ratios manually.

Setting Up a Monitoring Routine

Active borrowers should establish a regular monitoring routine. Here is a suggested approach:

1. Daily check — Open the dashboard once per day to glance at your LTV and health factor. This takes less than a minute.
2. Market awareness — If you see Bitcoin prices dropping significantly in the news or on a price tracker, check your dashboard immediately.
3. Weekly review — Once per week, take a more detailed look at your accrued interest and consider whether a partial repayment makes sense.
4. Threshold alerts — Pay special attention whenever your LTV crosses a round number threshold (50%, 60%, 70%).

Actions You Can Take to Improve Loan Health

When your loan health declines, you have several tools at your disposal. The right choice depends on your specific situation and available resources.

Add More Collateral

If you have additional Bitcoin available, depositing more BTC into your loan position will immediately lower your LTV. For example, if your LTV is at 70% and you add collateral equal to 40% of your current deposit, your LTV would drop to around 50%.

When to choose this option:

• You have extra BTC that you are not using for other purposes
• You want to keep your loan open and maintain your stablecoin position
• You believe Bitcoin's price will recover

Make a Partial Repayment

Repaying a portion of your outstanding balance reduces your debt, which lowers your LTV from the other side of the equation. This is particularly effective if you have stablecoins available but not additional BTC.

For detailed instructions on repayment, see our guide on how to repay a loan on Borrow.

When to choose this option:

• You have stablecoins available in your wallet
• You do not have additional BTC to deposit
• You want to reduce your interest costs going forward

Full Repayment

If your loan health is concerning and you want to eliminate risk entirely, you can repay the full balance and close the position. Your collateral will be returned to you after repayment.

When to choose this option:

• You have sufficient stablecoins to clear your entire debt
• Market conditions are highly volatile and you prefer to exit
• You no longer need the borrowed stablecoins

Do Nothing (When Appropriate)

Not every LTV fluctuation requires action. If your LTV is still well within safe ranges (below 55-60%), a temporary dip in BTC price may not warrant any response. The key is understanding your personal risk tolerance and the liquidation thresholds of the protocol you are using.

Understanding Liquidation Thresholds

Liquidation is the process by which your collateral is automatically sold to repay your debt when your LTV exceeds the protocol's maximum threshold. Understanding how liquidation works helps you set appropriate safety margins.

How Liquidation Works

When your LTV crosses the liquidation threshold:

1. The protocol identifies your position as eligible for liquidation
2. A liquidator (usually a bot) repays a portion of your debt
3. In exchange, the liquidator receives a portion of your collateral (typically at a discount)
4. Your remaining collateral and reduced debt result in a healthier LTV for the remaining position

Liquidation Is Partial, Not Total

In most DeFi protocols used by Borrow, liquidation is partial. This means only enough collateral is sold to bring your LTV back below the threshold. You do not necessarily lose all your Bitcoin — but you do lose some, plus a liquidation penalty.

The Cost of Liquidation

Being liquidated is expensive. Beyond the loss of collateral, you typically pay a liquidation penalty (often 5-10% of the liquidated amount). This is why proactive monitoring and early action are so much cheaper than waiting for liquidation to occur.

Strategies for Long-Term Loan Health

Maintaining a healthy loan over weeks or months requires a strategic approach. Here are proven strategies used by experienced borrowers.

Start With a Conservative LTV

The best time to protect your loan health is when you open the loan. Starting with a low LTV (35-45%) gives you substantial buffer against price drops. While you will receive fewer stablecoins relative to your collateral, you will sleep better at night.

Maintain a Stablecoin Reserve

Keep a reserve of stablecoins specifically for emergency partial repayments. If Bitcoin drops sharply, having stablecoins on hand allows you to reduce your LTV quickly without needing to sell other assets.

Monitor Macro Conditions

Pay attention to broader market conditions. During periods of high volatility (major economic announcements, regulatory news, significant market events), check your position more frequently and consider temporarily reducing your LTV.

Understand the Interest Impact

Remember that accrued interest increases your outstanding balance over time, which gradually pushes your LTV higher even if BTC's price stays flat. Factor interest accumulation into your long-term planning.

Integrating Monitoring With Your Broader Strategy

Loan monitoring should not exist in isolation. It connects to your broader financial strategy:

• If you are borrowing to invest — the returns on your investment should be weighed against the interest costs and liquidation risk of your loan
• If you are borrowing for expenses — plan your repayment timeline and set LTV targets that keep you comfortable until you can repay
• If you are borrowing to avoid selling BTC — your target hold period affects how aggressively you should manage your LTV

For more strategies on managing risk, read our guide on how to reduce liquidation risk. To understand the LTV ratio in more depth, see what is loan-to-value ratio.

Summary

Monitoring your loan health on Borrow is straightforward but essential. The dashboard gives you real-time access to your LTV, health factor, collateral value, outstanding balance, and accrued interest. By understanding what these metrics mean and establishing a regular monitoring routine, you can take timely action to protect your position and avoid costly liquidation events.

The most important takeaway: proactive monitoring is always cheaper than reactive liquidation. Check your dashboard regularly, understand your risk thresholds, and act before problems escalate.