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# Debt Collateral Ratio

Instadapp GUI interacts with various lending protocols. The various protocols use different ways of showing you the health of a loan position. Instadapp GUI standardizes the various protocols by exclusively using Debt to Collateral and Collateral Factor.

## Debt to Collateral

Debt to Collateral is a simple percentage that is calculated by dividing outstanding debt to collateral. ## Collateral Factor

Collateral Factor is the percentage a user can borrow against a particular asset.

For example: If Bitcoin has a Collateral Factor of 0.5 then a user can borrow up to 50% of its value. Collateral Factor is sometimes called Loan to Value. ## Maximum Debt to Collateral Ratio

Instadapp uses Debt to Collateral to determine the ratio of assets to liabilities. The percentage at which liquidations occur is determined by the various collateral factors of the underlying assets. The average collateral factor of all the supplied assets becomes the Maximum Debt to Collateral Ratio.

[Asset1/Collateral]CollateralFactor+[Asset2/Collateral]CollateralFactor...[Asset 1/Collateral] *Collateral Factor + [Asset2/Collateral] * Collateral Factor ...[Asset1/Collateral]∗CollateralFactor+[Asset2/Collateral]∗CollateralFactor...

Hitting the Maximum Debt to Collateral Ratio in any protocol will trigger the liquidation process. Liquidations have a different process on different protocols; please refer to the specific protocol to understand its unique liquidation process.

# Comparing Risk Parameters ## Borrow Limit: How Compound Finance calculates its Risk Parameter  ## Debt to Collateral Ratio: How Instadapp calculates its Risk Parameter In the example above only one collateral was used (wBTC) and its collateral factor is 60% Therefore, when the position hits 60% debt to collalteral ratio it will reach liquidation.

## Multiple Assets changes the Maximum Debt to Collateral Ratio

If there were multiple assets held then, the Maximum Debt is calculated by the collateral factor of the multiple assets based on weight.

For example: A Compound position that is half USDC and half wBTC has a Maximum Debt of 67%.

For example: A Compound position is 75% USDC and 25% wBTC has a Maximum Debt of 71%

## Liquidations are not different on Instadapp

The price and position in which a user is liquidated is the same. Reaching the Borrow Limit on Compound, is functionally the same has hitting the Maximum Debt to Collateral Ratio on Instadapp. Here is how it calculates: Still, have questions? Reach out to the team on Discord or via Email.