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Borrowing & Loans

Borrow assets against your crypto collateral using Naga's money market.

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New to Naga's money market? Start with the Earn & Borrow Overview to learn about the Earn & Borrow model.

What is Borrowing?​

Borrowing on Naga allows you to take out loans by depositing cryptocurrency as collateral. This lets you access liquidity without selling your assets.

How Borrowing Works​

  1. Deposit Collateral: Deposit crypto assets (BTC, ETH etc.) to secure your loan
  2. Borrow Assets: Borrow up to a percentage of your collateral value (usually up to 86%)
  3. Use Borrowed Funds: Spend, trade, or invest the borrowed assets
  4. Repay Loan: Pay back the borrowed amount plus interest
  5. Withdraw Collateral: Once repaid, withdraw your collateral

Key Concepts​

LLTV (Loan-to-Value Ratio)​

The maximum percentage of your collateral's value that you can borrow.

  • Example: With 86% LLTV, you can borrow up to $860 worth of assets for every $1,000 of collateral
  • Different markets have different LLTV ratios based on risk
  • Higher LLTV = more borrowing power but higher liquidation risk

Your LTV (Current Loan-to-Value)​

Your actual borrowed amount as a percentage of your collateral value.

  • Healthy: LTV < 60% (shown in green)
  • Moderate: LTV 60-80% (shown in yellow)
  • Risky: LTV > 80% (shown in red)

Liquidation​

If your LTV exceeds the maximum LLTV:

  • Your position can be liquidated
  • Liquidators repay your loan and receive your collateral at a discount
  • You lose your collateral
Important

Always monitor your LTV and maintain a safe buffer below the maximum LLTV to avoid liquidation.

Step-by-Step Guide​

Step 1: Choose a Market​

  1. Navigate to the "Borrow" page
  2. Browse available borrowing markets
  3. Each market shows:
    • Loan asset (what you'll borrow)
    • Collateral asset (what you'll deposit)
    • LLTV (maximum loan-to-value ratio)
  4. Click on a market to view details

Step 2: Supply Collateral​

  1. Click the "Collateral" tab
  2. Enter the amount of collateral you want to deposit
  3. Click "Approve [Token]" (first time only)
  4. Click "Supply Collateral"
  5. Confirm the transaction in your wallet

Step 3: Borrow Assets​

  1. Switch to the "Borrow" tab
  2. Enter the amount you want to borrow
  3. Review your new LTV ratio
  4. Ensure it's well below the maximum LLTV
  5. Click "Borrow"
  6. Confirm the transaction in your wallet

Step 4: Monitor Your Position​

Regularly check:

  • Your current LTV and health status
  • Collateral value (it changes with market prices)
  • Borrowed amount and accrued interest
  • Distance to the liquidation price

Step 5: Repay Your Loan​

When ready to close or reduce your loan:

  1. Switch to the "Repay" tab
  2. Enter the amount to repay
  3. Optionally, you can keep the collateral when repaying, so you can borrow again later
  4. Click "Repay"
  5. Confirm the transaction

Step 6: Withdraw Collateral​

After repaying:

  1. Go to the "Collateral" tab
  2. Click "Withdraw"
  3. Enter the amount to withdraw
  4. Confirm the transaction

Borrowing Strategies​

Conservative Borrowing​

  • Keep LTV below 10%
  • Provides large safety buffer
  • Lower risk of liquidation

Moderate Borrowing​

  • LTV between 10%-40%
  • Balance between capital efficiency and safety
  • Monitor regularly

Aggressive Borrowing​

  • LTV above 70%
  • High capital efficiency
  • High liquidation risk
  • Requires constant monitoring

Managing Your Position​

Adding Collateral​

If your LTV is getting too high:

  1. Add more collateral to lower your LTV
  2. This creates a buffer against price movements

Partial Repayment​

You can repay part of your loan to reduce LTV:

  1. Even small repayments improve your position
  2. Reduces liquidation risk
  3. Lowers interest costs

Emergency Actions​

If you're near liquidation:

  1. Add collateral: Fastest way to reduce LTV
  2. Repay part of loan: Reduces borrowed amount
  3. Close position: Repay fully and withdraw

Interest Rates​

Borrowing on Naga incurs interest:

  • Variable Rates: Interest rates change based on market utilization
  • Continuous Accrual: Interest accrues every block
  • Display: Current rates are shown before borrowing
  • Compounding: Unpaid interest is added to your loan balance

Common Use Cases​

Leverage Trading​

Borrow assets to increase your trading position without selling existing holdings.

Cash Flow Management​

Get short-term liquidity while maintaining long-term holdings.

Yield Farming​

Borrow assets to deploy in higher-yield opportunities.

Risks​

Liquidation Risk​

If your collateral value drops or loan value increases, you may be liquidated.

Interest Rate Risk​

Variable rates can increase, making loans more expensive.

Oracle Risk​

Price feeds determine collateral values. Oracle failures could trigger unwanted liquidations.

Smart Contract Risk​

Bugs in the protocol could affect your position.

See the full Risks documentation for details.

Best Practices​

Maintain Low LTV​

Keep your LTV well below the maximum to avoid liquidation during market volatility.

Monitor Regularly​

Check your position daily, especially during volatile markets.

Set Alerts​

Use external tools or set calendar reminders to check your position.

Have Repayment Plan​

Know where you'll get funds to repay your loan if needed urgently.

Start Small​

If you're new to borrowing, start with a small position to understand the mechanics.

Fees​

  • Interest: Paid to lenders, varies by utilization
  • Gas Fees: Paid for all transactions
  • No Origination Fee: No upfront fees to borrow
  • No Early Repayment Penalty: Repay anytime

Common Issues​

Cannot Borrow More​

  • Your LTV may be at the maximum
  • The market may not have sufficient liquidity
  • Your collateral value may have decreased

Position Near Liquidation​

  • Add more collateral immediately
  • Or repay part of your loan
  • Don't wait for prices to recover

High Interest Costs​

  • Consider repaying and using a different market
  • Or close position if rates are unsustainable

Next Steps​