# Risk management

## **Borrow limit** 

The Borrow Limit in ElaraLend represents the maximum percentage of the total amount you can borrow, determined by the value of the collateral you have deposited and the available liquidity. Liquidation occurs when a user's borrowed position exceeds the borrowing limit (when borrow utilization is > 100%), therefore: 

`Borrow limit = borrow utilization at 100%` 

In ElaraLend, the Borrow Limit is set at a maximum of 95% to prevent liquidation events.

## **Borrow utilization** 

In the Portfolio section of ElaraLend, you'll find a "Borrow Utilization" bar, providing a visual representation of your account's health. It illustrates how close your position is to the liquidation threshold. Monitoring this bar is crucial for maintaining a healthy borrowing position within the ElaraLend platform.

The lower the % of utilization, the safer the user's collateral is:

* Borrow utilization between 0-70%: **White** (No or low risk)
* Borrow utilization between 70% to 90%: <mark style="color:yellow;">**Yellow**</mark> (Medium to high risk, requiring closer attention to positions)
* Borrow utilization > 90%: <mark style="color:red;">**Danger**</mark> (High risk of liquidation)

## **Improving borrow utilization**

To improve borrow utilization on ElaraLend, users can:

* Repay a portion or the full amount of the borrowed amount
* Add more collateral

## **Liquidation**&#x20;

Liquidation in ElaraLend occurs when a borrower's borrowed asset amount crosses the "borrow limit", indicating that collaterals are not fully covering the borrowed amount as per collateral factors. During a liquidation event, liquidators will seize the available collateral from accounts that cross the liquidation threshold and execute market transactions to help repay the borrower's debt, taking a fee from the process.

Liquidators are bots run by external third parties, helping to maintain the collateral health in ElaraLend. Please refer to Close Factor and Liquidation Incentive for more information on fees.

{% hint style="info" %}
Note: While the current borrowing mechanism is pool-specific, future updates to ElaraLend will introduce cross-pool borrowing, potentially affecting how borrow limits and utilization are calculated across different pools. Users will be notified of any changes to these mechanisms when new features are implemented.
{% endhint %}


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