Loan Health in WX-Credit

Understanding Loan Health in WX-Credit

Loan health within Wallex Credit serves as a measure of your loan's strength, determined by considering both the outstanding loan amount and the value of your collateral.

What is Loan to Value (LTV)?

The Loan-to-Value (LTV) ratio is a way to measure the risk associated with borrowing against your cryptocurrency collateral. It's calculated by dividing the amount you've borrowed by the value of the crypto you've put up as security, then expressing that as a percentage. You can easily monitor your LTV in real-time through the Wallex Dashboard and Apps. If you notice it creeping too high, nearing a risky level, you have the option to add more collateral to your existing credit line. This helps bring your LTV back down to a safer range, ensuring your borrowing remains manageable and secure.

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Calculating Loan Health

The calculation of loan health revolves around the loan-to-value (LTV) ratio, found by dividing your loan amount by the value of your collateral. This ratio is then subtracted from 100% to determine the loan health level.

For instance, if your loan is $100 with collateral valued at $1000, your LTV would be 10% (100 / 1000 = 10%). Consequently, your loan health would stand at 90% (100% - 10% = 90%).

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Understanding Loan Health Levels

• Low Risk (30% - 65%): Indicates good health, requiring no immediate actions until the loan's maturity date.

• Medium Risk (66% - 75%): Occurs when the value of collateral drops, leading to an increased LTV%. You’ll be alerted to take necessary action to avoid the high-risk area.

• High Risk (76% - 83%): If the medium risk threshold is breached, the collateral may become insufficient to cover the Credit-To-Value (LTV). It is recommended to add more collateral to ensure loan health and to avoid liquidation.

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Managing Loan Health

Clients have access to an [Auto Top-Up] button, which automatically maintains the LTV% within preset limits of 5%, 10%, or 15%. This prevents system overflows with Auto-Credit-Top-Up rows.

Additionally, clients can adjust collateral when the LTV drops below the initial percentage due to a rise in the collateral price or a fall in the credit asset price.

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Decreases in collateral value may impact loan health. Wallex ensures clients are notified promptly to either repay the loan or add more collateral, maintaining optimal loan health.

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