> ## Documentation Index
> Fetch the complete documentation index at: https://docs.dynamo.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Collateral and LTV

> Learn how collateral works, how loan-to-value ratios determine your borrowing power, and how to keep your position safe from liquidation.

To borrow on Dynamo, you first post **collateral**, assets you deposit into a market that serve as security for your [Morpho loan](https://dynamo.finance/). The protocol holds your collateral and releases it when you repay your debt. Because the blockchain is non-custodial, this process is governed entirely by smart contracts with no human intermediaries.

## Liquidation Loan-to-value (LLTV) ratio

The **liquidation loan-to-value ratio** defines how much you can borrow relative to the value of your collateral. Each asset has a maximum LLTV set by the market's risk parameters.

```text theme={null}
Max borrow = Collateral value × Max LLTV
```

### LLTV examples

| Collateral | Collateral value | LLTV | Max you can borrow |
| ---------- | ---------------- | ---- | ------------------ |
| USDC       | \$10,000         | 90%  | \$9,000            |
| ETH        | \$10,000         | 80%  | \$8,000            |
| BTC        | \$10,000         | 75%  | \$7,500            |
| Altcoin    | \$10,000         | 60%  | \$6,000            |

More volatile assets carry lower LLTV ratios because their value can swing more quickly, increasing the risk of under-collateralization.

<Info>
  Max LLTV is the cap on what you can borrow when you open a position. Borrowing at or near the maximum immediately puts you at risk if collateral prices move. Most users borrow at 50–70% of maximum to maintain a safety buffer.
</Info>

## Health factor

Your **health factor** is a single number that summarizes the safety of your position. It compares your collateral value (weighted by the liquidation threshold) to your outstanding debt.

```text theme={null}
Health factor = (Collateral value × Liquidation threshold) / Total debt
```

| Health factor | Meaning                                     |
| ------------- | ------------------------------------------- |
| > 2.0         | Very safe — large buffer before liquidation |
| 1.5 – 2.0     | Safe — moderate buffer                      |
| 1.1 – 1.5     | Caution — approaching risk zone             |
| 1.0 – 1.1     | Danger — liquidation is imminent            |
| ≤ 1.0         | Liquidatable                                |

<Warning>
  If your health factor drops to 1.0 or below, your position can be liquidated. Monitor it regularly, especially when collateral prices are volatile.
</Warning>

## Increasing your borrowing power

If you want to borrow more or improve your health factor, you have two options:

<Steps>
  <Step title="Add more collateral">
    Deposit additional collateral into the market. This raises the collateral value side of the equation and improves your health factor immediately.
  </Step>

  <Step title="Repay part of your debt">
    Repay some of your outstanding [crypto loans](https://dynamo.finance/). This reduces the debt side and directly improves your health factor without requiring additional capital.
  </Step>
</Steps>

<Tip>
  Keep your health factor above 1.5 as a rule of thumb. This gives you room to absorb a 25–30% drop in collateral value before liquidation risk becomes serious.
</Tip>