# Interest Rates Mechanism

## Zest Interest Rates Mechanism

Borrowing rates on Zest Protocol adjust dynamically based on key pool metrics:

– **Utilization Rate:**\
Represents the proportion of funds currently lent out. It is calculated as the amount borrowed divided by the total pool size (borrowed + available).\
\&#xNAN;*Example:* If 70% of the pool is in use, the utilization rate is 70%.

– **Target Utilization Rate:**\
The optimal usage level the protocol aims to maintain. At this threshold, interest rates are  are calibrated to promote balanced activity between lenders and borrowers.

– **Interest Rate at Target Utilization:**\
The borrowing rate applied when the pool is operating at its target utilization—designed to support steady borrowing demand while maintaining pool stability.

– **Maximum Borrowing Rate:**\
As utilization exceeds the target threshold, borrowing rates increase progressively until they reach a capped maximum. This mechanism encourages repayments and helps protect pool liquidity.

To explore interest rate behaviour for a specific asset, navigate to the **Borrow Stacks Market**, click **‘Asset Overview’**, then select **‘Details’**.

Scroll down to view a chart showing current utilization, the target rate, and how borrowing rates adjust based on pool usage.

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