What is a health factor?

Health factor is Aave's measure of loan safety. It equals the collateral value times the liquidation threshold, divided by the borrowed value. A health factor above 1 is safe; at or below 1 the position becomes eligible for liquidation, where part of your collateral is sold to repay the debt.

What is the difference between LTV and liquidation threshold?

Maximum LTV is the most you can borrow against an asset when opening a position. The liquidation threshold is higher and marks the point at which the position is liquidated as the collateral value falls. The gap between them is your safety buffer, so always borrow well below the max LTV.

How is the liquidation price calculated?

The tool finds the collateral price drop that brings the health factor to exactly 1. Holding the borrow fixed, liquidation occurs when collateral value times liquidation threshold equals the borrow value, so the trigger price is the current collateral value scaled down by the borrow divided by (collateral times threshold).

What health factor should I target?

There is no single answer, but many borrowers keep a health factor of 1.5 to 2 or higher for volatile collateral to survive sharp price swings without being liquidated. Stablecoin-collateralised positions can run closer to 1, while volatile assets need a much larger cushion.

Does this account for accrued interest?

It uses the borrow value you enter, so to be accurate include any interest that has accrued on the debt. Interest steadily increases the borrowed value over time, which lowers the health factor even if collateral price is unchanged, so re-check periodically.

DeFi Collateral Ratio & Health Factor Calculator

DeFi lending protocols like Aave and Compound let you borrow against supplied collateral, but a falling collateral price can trigger an automatic liquidation. This calculator computes the two key safety metrics — the collateral ratio and the health factor — plus how much more you can safely borrow and the exact collateral price that would push your position into liquidation.

How it works

The health factor follows the Aave definition, using the liquidation threshold rather than the maximum LTV:

health factor   = (collateral × liquidation threshold) / borrow
collateral ratio = collateral / borrow × 100%
borrow headroom  = collateral × liquidation threshold − borrow
liquidation price = current collateral price × (borrow / (collateral × threshold))

Liquidation becomes possible when the health factor reaches 1, which is the moment the collateral value times the liquidation threshold equals the borrowed amount. The liquidation price is simply the current collateral value scaled by the ratio that drives the health factor to 1, holding the borrow fixed.

Example and tips

Suppose you supply 10,000 of ETH collateral, borrow 4,000 of a stablecoin, and ETH has an 80 percent liquidation threshold. Your health factor is 10,000 times 0.8 divided by 4,000, which is 2.0 — comfortably safe. ETH would need to fall by half before the health factor hits 1. Keep a generous buffer on volatile collateral: a health factor near 1 leaves no room for a sudden wick, and interest accruing on the debt erodes the buffer over time even when prices hold.