# Debt Collateral Ratio

Instadapp GUI interacts with various lending protocols each lending protocol uses different math to show risk to the user. On the Instadapp Dashboard we show users risk in two ways:

## Max Debt to Collateral Ratio

#### Debt to Collateral Ratio

Debt to Collateral is a simple formula. To find the debt to collateral ratio you divide the value of the outstanding debt to the value of the collateral. \$1000/\$2000 = 50 %

#### Max Debt Ratio: How much credit?

Most protocols use Collateral Factor (or another term) which describes how much a user can borrow against their deposit. These parameters are usually determined by the asset time. For example: If Bitcoin has a Collateral Factor of 0.5 then a user can borrow up to 50% of its value. Collateral Factor is sometimes called Loan to Value on other platforms and services. \$1000 USDC * 85% = \$850

#### Maximum Debt to Collateral Ratio

The percentage at which liquidations occur is determined by the various collateral factors of the underlying assets. The average collateral factor of all the supplied assets becomes the Maximum Debt to Collateral Ratio.Hitting the Maximum Debt to Collateral Ratio in any protocol will trigger the liquidation process.
Each protocol has their own liquidations process please refer to the specific protocol to understand its unique liquidation process:

## D/C Ratio compared to Borrowing Factor This is the same position on Compound shown on Instadapp (left) and Compound (right)

### Borrow Limit used on Compound:

#### How Compound Finance calculates its Risk Parameter ### Debt to Collateral Ratio used on Instadapp:

#### How Instadapp calculates its Risk Parameter In the example above only one collateral was used (wBTC) and its collateral factor is 60% Therefore, when the position hits 60% debt to collateral ratio it will reach liquidation.

### Multiple Assets changes the Maximum Debt to Collateral Ratio

If there were multiple assets held then, the Maximum Debt is calculated by the collateral factor of the multiple assets based on weight.
For example: A Compound position that is half USDC and half wBTC has a Maximum Debt Ratio of 67%.
For example: A Compound position is 75% USDC and 25% wBTC has a Maximum Debt Ratio of 71%

### Liquidations are not different on Instadapp

The price and position in which a user is liquidated is the same. Reaching the Borrow Limit on Compound, is functionally the same as hitting the Maximum Debt to Collateral Ratio on Instadapp. You can check this by calculating them together: 