# Traditional Borrowing

Start by visiting [https://app.zestprotocol.com](https://app.zestprotocol.com/) and connecting your Stacks wallet. We currently support [Leather](https://leather.io/), [Xverse](https://www.xverse.app/), [OKX Wallet](https://www.okx.com/web3), [Fordefi](https://fordefi.com/), and [Asigna](https://asigna.io/).

{% hint style="info" %}
Following the V2 launch, borrow caps on the V1 have been reduced to encourage migration to the more efficient V2.
{% endhint %}

### Getting Started <a href="#getting-started" id="getting-started"></a>

Before you can borrow, you’ll need to supply an asset to be used as collateral. Please refer to [How to use Stacks Market to Earn Yield](https://docs.zestprotocol.com/start/borrow/zest-protocol-borrow-overview/how-to-use-stacks-market-to-earn-yield).

Only assets with a **green checkmark** under the **‘Collateral’** column are eligible.

<figure><img src="/files/OW06qrhk7c84dOuOgtLd" alt="" width="496"><figcaption></figcaption></figure>

As of now, all assets on Zest Protocol are in **isolation mode**—meaning only one type of asset (e.g. **stSTX**, **USDC**, **STX**) can be enabled as collateral at any given time.

<figure><img src="/files/TTdHRDIBlbO6ZGYcMQup" alt="" width="508"><figcaption></figcaption></figure>

To change the enabled collateral asset:

1. Ensure you have **no active borrowing positions**
2. Disable the **‘Isolated’** toggle for your currently designated collateral asset and approve the transaction
3. Enable the **‘Isolated’** toggle for the new asset and approve the transaction

### Borrowing Against Your Collateral <a href="#borrowing-against-your-collateral" id="borrowing-against-your-collateral"></a>

Once you've supplied collateral, **‘Borrow’** buttons will appear in orange under **‘Assets to Borrow’**.

To proceed: – Find the asset you wish to borrow and click **‘Borrow’** – This will open the **‘Borrow $XYZ’** popup

{% embed url="<https://www.loom.com/share/0ad78482b8554fbebd39d0f2d356b0b9>" %}

In the **Borrow $XYZ** popup, a user can see how much they can borrow and the estimated liquidation price, which adjusts based on the amount they choose to borrow.

The liquidation price is the collateral asset price at which your collateral will get liquidated. If you get liquidated, you get to keep the asset you borrowed but you lose (potentially all of) your collateral.

<figure><img src="/files/XGw5puXW7bdunuEcLD5N" alt="" width="431"><figcaption></figcaption></figure>

{% hint style="info" %}
**Understanding the ‘Borrow $XYZ’ Popup** **1) LTV (Loan-to-Value):** The ratio between your borrowed amount and the value of your supplied collateral. *Example:* If you supply $1,000 and borrow $500, your LTV is 50%.

**2) Max LTV:** The maximum LTV allowed before borrowing is no longer permitted.

**3) Liquidation Threshold:** The LTV level at which your loan becomes unsafe, triggering the risk of liquidation. If your LTV crosses this threshold, your collateral may be partially or fully sold to repay your debt.

To learn more about liquidation, see [#what-happens-when-i-get-liquidated](#what-happens-when-i-get-liquidated "mention").
{% endhint %}

When you have opened a loan, interest automatically accrues to your debt in the UI.

### Health Factor <a href="#health-factor" id="health-factor"></a>

Once a borrow position is active, a **Health Factor** widget will appear in the UI. It provides a real-time view of your loan status by calculating your LTV dynamically.

The Health Factor ranges from **1 to 100**, with values above 100 shown as **∞**. You can click the tooltip next to the widget for more detail on liquidation risk parameters.

If your Health Factor drops **below 1**, your position will be eligible for liquidation. See \[link] for more on liquidation: [What Happens When I Get Liquidated?](#what-happens-when-i-get-liquidated)

<figure><img src="/files/dEqtsWaiTNodYybQv9CL" alt="" width="563"><figcaption></figcaption></figure>

### Repaying your Loan <a href="#repaying-your-loan" id="repaying-your-loan"></a>

You can repay your loan **in full** or **partially** at any time by clicking **‘Repay’**. Partial repayments reduce your LTV and lower liquidation risk. Entering an amount in the **‘Repay’** field will display your updated liquidation price.

{% embed url="<https://www.loom.com/share/2d621748509643b79980f31abb8105a9>" %}

### Topping up Collateral <a href="#topping-up-collateral" id="topping-up-collateral"></a>

You can also reduce liquidation risk by supplying additional collateral.

To do this, deposit more of the asset you have enabled as collateral via **‘Assets to Supply’**. The UI will display your new liquidation price.

*Example:* If you’ve enabled **stSTX** as collateral, you must supply additional **stSTX** to strengthen your position.

<figure><img src="/files/ok7GPTMzbA5DDj2IFYjB" alt="" width="501"><figcaption></figcaption></figure>

### What Happens When I Get Liquidated? <a href="#what-happens-when-i-get-liquidated" id="what-happens-when-i-get-liquidated"></a>

{% embed url="<https://www.loom.com/share/6719d43375df47e1b7157d6ad6c77a7b>" %}

By default, Zest allows borrowing up to **50% LTV** (except when using sBTC as collateral, which is 70%).

Depositing $1,000 in collateral enables borrowing up to $500. If your LTV reaches **70%**, your collateral becomes eligible for liquidation and incurs a **10% penalty fee**.

If you're using **E-Mode**, the parameters are different (Up to 80% LTV, Liquidation triggered at 85% LTV, Reduced penalty of 5%). Read more about E-Mode: [E-Mode Borrowing](https://docs.zestprotocol.com/start/borrow/zest-protocol-borrow-overview/how-to-use-stacks-market-to-borrow-assets/e-mode-borrowing)

**There are 3 main scenarios in which liquidation may be triggered:**

<table><thead><tr><th width="140">Scenario</th><th>Initial Collateral (STX)</th><th>Initial Collateral (STX)</th><th width="150">What Changes?</th><th>When Liquidation Happens</th><th>Result After Liquidation</th></tr></thead><tbody><tr><td>1<strong>. Interest builds up</strong></td><td>$1,000</td><td>$500 in USDC</td><td>Interest increases loan balance (to $750 USDC)</td><td>LTV reaches 70% due to loan growing</td><td>Collateral liquidated to pay off $700 USDC loan + 10% penalty ($100 in STX) → $200 STX left</td></tr><tr><td><strong>2. Borrowed asset goes up</strong></td><td>$1,000</td><td>$500 in BTC</td><td>BTC increases 50% (to $750)</td><td>LTV reaches 70% due to borrowed asset rising</td><td>Liquidation + penalty unless more STX is added</td></tr><tr><td><strong>3.</strong> <strong>Collateral drops in value</strong></td><td>$1,000</td><td>$500 in BTC</td><td>STX drops 30% (to $700 collateral)</td><td>LTV exceeds 70% due to collateral falling</td><td>Liquidation + penalty unless more STX is added</td></tr></tbody></table>


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