> For the complete documentation index, see [llms.txt](https://docs.aeralend.app/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.aeralend.app/how-it-works/health-and-liquidation.md).

# Health and liquidation

Four numbers decide what happens to a loan. They are easy to blur together and they mean different things.

|                       | Core (bCOOK) | What it does                                               |
| --------------------- | ------------ | ---------------------------------------------------------- |
| Haircut               | 5%           | How much of your collateral's value Aera declines to count |
| Max LTV               | 55%          | Where Aera stops letting you borrow more                   |
| Liquidation threshold | 65%          | Where someone else can seize your collateral               |
| Liquidation bonus     | 8%           | What a liquidator is paid for doing it                     |

## 55% and 65% are not the same line

This is the most consequential distinction in the product.

* **55%** limits *your* actions. Reach it and the Borrow button refuses.
* **65%** limits *your safety*. Cross it and a stranger can repay part of your debt and take your collateral at a discount.

The 10 points between them are the buffer. You cannot borrow into them — you can only drift into them, because the bCOOK rate moved or because interest accrued. The application draws them differently for that reason.

<figure><img src="/files/rBTqmkNgMzzFUWGdzj77" alt="The LTV bar with both limits marked"><figcaption><p>Dashed: borrowing stops. Solid red: collateral can be seized.</p></figcaption></figure>

## The health factor

One number, and it is the one to watch.

$$\text{health} = \frac{\text{collateral value} \times 0.65}{\text{debt}}$$

where collateral value is already after the 5% haircut. Above 1.00 your debt is below the liquidation line; at or below it, you can be liquidated. With no debt there is no health factor at all, which is why the app shows nothing rather than infinity.

| Health          | The app says     | bCOOK can fall by |
| --------------- | ---------------- | ----------------- |
| **≥ 1.50**      | Healthy          | 33% or more       |
| **1.10 – 1.50** | Caution          | 9 – 33%           |
| **1.00 – 1.10** | Danger           | under 9%          |
| **< 1.00**      | Liquidatable now | —                 |

{% hint style="warning" %}
Borrowing the full 55% puts you at health **1.18** — the *Caution* band, immediately, on a fresh loan. A 15% fall in bCOOK reaches the line. The maximum is a limit, not a recommendation.
{% endhint %}

## Health falls on its own

Three things move it, and only one of them is you:

1. **The bCOOK rate falls.** Collateral is worth less.
2. **Interest accrues**, every slot, forever, with no action from anyone.
3. **You borrow more or unlock collateral** — and the app shows you where to before you sign.

A position opened comfortably and never touched will eventually reach the line on interest alone.

## What liquidation does

Anyone may repay part of your debt and receive collateral worth that repayment **plus 8%**. The bonus is what makes it worth their while; without one nobody would act and the pool would carry bad debt.

One liquidation may repay at most **50%** of your debt, or all of it once health falls below 0.95 — a position that deep is close to insolvent, and forcing a liquidator through repeated partial closes only adds transactions between the protocol and a bad debt.

You lose the bonus and nothing else. Your debt falls by exactly what was repaid, there is no separate penalty, and the rest of your position stays yours.

{% hint style="danger" %}
There is no grace period, no notification and nobody to appeal to. Liquidation is a transaction anyone can send the moment the condition is true.
{% endhint %}

## Avoiding it

Borrow well under the limit. Watch the health factor rather than the LTV — it is the number the program tests. Repaying and adding collateral are always available, in every state, including when Aera has frozen new borrowing.


---

# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.

## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.

Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:

```
GET https://docs.aeralend.app/how-it-works/health-and-liquidation.md?ask=<question>&goal=<endgoal>
```

`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.

The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.

Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.