# Debt Collateral Ratio

***Your position may look different on Instadapp, but Instadapp doesn't modify or change the underling protocol.***

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 <a href="#block-042b3a14f75b4294be02054af09f188f" id="block-042b3a14f75b4294be02054af09f188f"></a>

* ### Heath Factor [used by AAVE](https://docs.aave.com/faq/borrowing#what-is-the-health-factor)

## Max Debt to Collateral Ratio <a href="#block-042b3a14f75b4294be02054af09f188f" id="block-042b3a14f75b4294be02054af09f188f"></a>

#### 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 %](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2Feac44455-d49b-413a-8569-f9e185e254bb.png\&w=3840\&q=80)

#### Max Debt Ratio: How much credit? <a href="#block-04b5b11f82764105839ef8fae38be646" id="block-04b5b11f82764105839ef8fae38be646"></a>

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 ](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2F1bd6fa78-3b20-494a-af2c-ca8f823d3e57.png\&w=3840\&q=80)

#### Maximum Debt to Collateral Ratio <a href="#block-49d9e786d1244401b8efc27b808cb57a" id="block-49d9e786d1244401b8efc27b808cb57a"></a>

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.&#x20;

**Each protocol has their own liquidations process please refer to the specific protocol to understand its unique liquidation process:**

{% content-ref url="../protocols/makerdao/liquidations-on-makerdao" %}
[liquidations-on-makerdao](https://guides.instadapp.io/protocols/makerdao/liquidations-on-makerdao)
{% endcontent-ref %}

{% content-ref url="../protocols/compound/liquidations-on-compound-v2" %}
[liquidations-on-compound-v2](https://guides.instadapp.io/protocols/compound/liquidations-on-compound-v2)
{% endcontent-ref %}

{% content-ref url="../protocols/liquity/liquidations-on-liquity" %}
[liquidations-on-liquity](https://guides.instadapp.io/protocols/liquity/liquidations-on-liquity)
{% endcontent-ref %}

## D/C Ratio compared to Borrowing Factor <a href="#block-d4461b97692c4e9598d9b0dfc1b200c1" id="block-d4461b97692c4e9598d9b0dfc1b200c1"></a>

![This is the same position on Compound shown on Instadapp (left) and Compound (right)](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2F0671d8a2-916e-4d3b-8de1-d35f944918fe.jpeg\&w=3840\&q=80)

### Borrow Limit used on Compound:  <a href="#block-58d099cdb20c4b078ba67b4cad0928cf" id="block-58d099cdb20c4b078ba67b4cad0928cf"></a>

#### How Compound Finance calculates its Risk Parameter <a href="#block-58d099cdb20c4b078ba67b4cad0928cf" id="block-58d099cdb20c4b078ba67b4cad0928cf"></a>

![](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2F4fce5479-dd31-4827-a5bd-147c24fb6335.png\&w=3840\&q=80)

### Debt to Collateral Ratio used on Instadapp:  <a href="#block-d65231b69d7643b1bde6dd3b8d737a0a" id="block-d65231b69d7643b1bde6dd3b8d737a0a"></a>

#### How Instadapp calculates its Risk Parameter <a href="#block-d65231b69d7643b1bde6dd3b8d737a0a" id="block-d65231b69d7643b1bde6dd3b8d737a0a"></a>

![](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2F2e57de4f-dfd0-4475-a484-c16294b2547f.png\&w=3840\&q=80)

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 <a href="#block-97e49a43b45246e0945ca4ddb6bf3b92" id="block-97e49a43b45246e0945ca4ddb6bf3b92"></a>

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 <a href="#block-7dfee002339e45aea935cd1b8e3c89b6" id="block-7dfee002339e45aea935cd1b8e3c89b6"></a>

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:

![](https://codex.instadapp.io/_next/image?url=https%3A%2F%2Fsuper-static-assets.s3.amazonaws.com%2F52f07785-fab3-4b4a-8409-e5be158d058c%2Fimages%2F652dfd88-6b7e-42c4-9b9e-36255af4e4db.png\&w=3840\&q=80)