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Borrow loans are issued through an underlying lending protocol on Arc, and each market sets a liquidation threshold. The App Kit SDK exposes your position’s distance from that threshold as a loan-to-value ratio (LTV) and a health factor, grouping the health factor into bands you can act on before liquidation.

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Health fields

Check loan state to see these health fields:

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Loan-to-value ratio (LTV)

Loan-to-value ratio is the ratio of your outstanding debt to the current value of your collateral, denominated in the borrowed asset. For example, a loan that carries 3,000 USDC in debt against cirBTC worth 10,000 USDC has an LTV of 0.30. LTV rises as debt accrues interest, as the value of cirBTC falls, or both.

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Health factor

Health factor is the inverse safety measure of LTV. It equals LLTV / LTV, where LLTV (liquidation loan-to-value) is the market’s liquidation threshold. The health factor tells you how close a position is to liquidation:
  • Above 1.0: the position is not liquidatable.
  • At 1.0: the position is at the liquidation boundary.
  • Below 1.0: a third-party liquidator can repay part of the debt and seize collateral to bring the position back in line.

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Health factor bands

The health factor maps to five bands. Use the band to drive alerts and to gate operations that would move the loan further toward liquidation.

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Liquidation

When a loan crosses into LIQUIDATABLE, the underlying lending protocol lets a liquidator repay part or all of the debt in exchange for the collateral at a discount. Liquidation does not go through the SDK. It is a permissionless protocol action. Every position reports a liquidationPrice, the cirBTC price (denominated in USDC) at which the loan would cross into LIQUIDATABLE. Show it to users so they can act before the market reaches it.