The collateral value must always exceed the amount of the loan debt. If the collateral value drops slightly (say by 5%), nothing is likely to happen to your loan. In case of a significant decrease in collateral value, there is a higher risk that the collateral will no longer be able to secure the loan debt. If the collateral value exceeds the liquidation LTV of the loan debt, we will have to liquidate the collateral asset. LTV liquidation rate is specified in the loan form and varies from 65% (for example, for loans backed by LINK) to 95% (for loans backed by BTC).
You will be charged a liquidation fee if there is a liquidation. Liquidation means the sale of collateral on the market by market order. The amount received after liquidation is used to repay the loan debt (which includes the loan amount, accrued interest and commissions). To reduce the risk of loan liquidation, you can add more collateral at any time, thus increasing the value of the loan collateral and reducing LTV.
If the value of your collateral is reduced smoothly, we will notify you by email that the value of your collateral is decreasing and the risk of liquidation is thereby increasing, and you can reduce the risk of liquidation by adding more collateral. Certainly, if the value of the collateral decreases and the risk of liquidation increases, you can repay the debt in the full at any time and close the loan.