# Borrowing

## What is Fixed-rate Borrowing?

Spine Protocol allows you to borrow against your crypto assets at a fixed rate. To borrow, you need to deposit collateral, such as ETH. Borrowers automatically mint [sUSDC](https://spine-protocol.gitbook.io/spine-finance/key-mechanisms-and-glossary#susdc-spine-usdc) by locking up your collateral and select a maturity date, securing a fixed interest rate until the loan matures. This provides predictability and stability in your repayments.&#x20;

For example, you can collateralize ETH and to borrow 2,000 USDC, our protocol will automatically mint an enough amount of sUSDC to withdraw the 2000 USDC, let's say for one year at a fixed interest rate of 4%. By the end of the term, you will repay the borrowed amount plus the fixed interest. If the interest accrued is 80 USDC, your total repayment amount will be 2,080 USDC.&#x20;

To safeguard lenders, if the value of your collateral drops significantly, it can be automatically liquidated to ensure the lenders receive their yield.

Watch our video to see how simple it is to borrow through Spine: [**BORROWING GUIDE.**](https://spine-protocol.gitbook.io/spine-finance/product-video-guides/borrow)&#x20;

## Who is Fixed-rate Borrowing designed for?

Fixed-rate borrowing on Spine Protocol is designed for users who want to access capital without selling their assets. This feature allows you to obtain extra capitals while maintaining your exposure to the potential upside of your holdings.&#x20;

Many users prefer fixed-rate borrowing because it provides financial predictability and stability. With Spine's fixed interest rate, you can plan your repayments with long-maturity duration, obtain stable interest rates with competitive transaction fees.

## How much can you borrow?

The amount you can borrow on Spine Protocol depends on the assets you supply as collateral and the asset you wish to borrow. Spine Protocol employs an algorithm to determine your borrowing limit, which is adjusted based on daily transactions and current market liquidity.

## What are transaction fees?

When you borrow at a fixed rate on the Spine Protocol, a fee applies. This fee is calculated as a percentage of the total interest accrued until the maturity of the loan. The fee structure is designed to be lower for shorter-term loans and higher for longer-term loans.

For example, if you're borrowing 1,000 USDC fixed for one year at an interest rate of 4%, you will pay an upfront fee based on the interest accrued. The interest earned over the year is 40 USDC, and if the fee is set at 8% of the interest earned, the fee would be 3.2 USDC (40 USDC \* 0.08 = 3.2 USDC). However, if you're only fixing your rate for six months, the interest earned over that period would be 20 USDC, and the fee would be 1.6 USDC (20 USDC \* 0.08 = 1.6 USDC).

{% hint style="info" %}

```
Transaction_fee = basis_point * time_to_maturity
```

{% endhint %}

The basis point will be calculated by our [BondMM](https://spine-protocol.gitbook.io/spine-finance/resources/developers), the concept of basis point is to keep the transaction fee always above zero. Spine offers a competitive transaction fee, which is fair for traders and liquidity providers.

## What happens at maturity?

When your fixed-rate loan on Spine Protocol reaches maturity, the total accrued interest over the loan term is calculated, and you are required to repay both the amount borrowed and the accrued interest. For example, if you borrowed 1,000 USDC for one year at an interest rate of 4%, you would need to repay 1,040 USDC (1,000 USDC principal + 40 USDC interest). No additional fees are applied at maturity.

If you do not repay the loan 24 hours after the maturity date, it will switch into late-payment interest of 0.1% per 24h, ensuring continuous interest accrual. **14 days** after the late-payment fees had applied, your collateral is liquidated.&#x20;

## What is liquidation?

Liquidation occurs when the value of your collateral falls below the liquidation threshold. This threshold ensures that there is sufficient collateral to cover the borrowed amount. If your collateral's value decreases enough to cross this threshold, liquidation is triggered.

During liquidation, a portion of your collateral is sold at a discount to its market value to a liquidator. The liquidator uses the proceeds from this sale to repay your debt on your behalf. This process ensures that the loans remain adequately collateralized and protects lenders from potential losses due to the borrower's inability to repay the loan.

## Liquidation threshold?

The rate differs between different collateral assets but the range is between 0.7 - 0.95 between the amount borrowed and posted collateral. To avoid liquidation on Spine Protocol, you can either repay part or all of your loan or deposit more collateral. These actions maintain the required collateral ratio and protect your assets.
