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When borrowing on Bridgesplit Markets, a user selects:

  1. An asset and amount to borrow
  2. How long they wish to borrow for
  3. An asset and amount to use as collateral

The list of available borrow assets, collateral assets, and loan duration options are available here. Each collateral asset has a loan-to-value ratio that determines the maximum borrowable amount.

The borrower's receives funds at the lowest rate on the market and the collateral is escrowed. The collateral is returned to the borrower once the borrowed funds and accrued interest have been fully repaid. A borrower will default, losing their collateral, if:

  1. The loan has not been fully repaid by the due date (Payment-Based Default)
  2. The loan's health factor falls below 0% (Price-Based Default)

To learn more about defaults and how health factor is calculated, see Loan Health & Defaults.

A borrower has two ways to improve a loan's health factor: (1) topping up collateral (2) repaying a loan or portion of a loan early.

Topping-up Collateral

A borrower may deposit additional collateral for a loan, increasing the collateral value and increasing the health factor. The additional collateral must be of the same asset. Excess collateral may not be withdrawn until the loan conclusion with the rest of the collateral.

Early Repayment

A borrower may repay a loan in full before the loan due date. Upon repayment, the loan will end and the collateral will be returned to the borrower.

A borrower may also partially repay a loan early, decreasing the loan value and increasing the health factor.

Prepayment Penalty

Borrowers must pay 40% of the original interest for the unused time of a loan. In other words, interest is reduced by 60% for any early repaid loan amount.

To illustrate the prepayment penalty, consider the following example:

  1. The total interest due for 1-day, 40,000 USDC loan is 20 USDC (18.25% APR)
  2. A borrower repays 10,000 USDC after 12 hours
  3. After the full day has passed, borrower's total interest owed has three parts, for a total of 18.5 USDC (vs. 20 USDC):
    1. 18.25% APR on 40,000 USDC for the first 12 hours -> 10 USDC
    2. 18.25% APR on 30,000 USDC for the second 12 hours -> 7.5 USDC
    3. 40% of 18.25% APR on 10,000 USDC for the second 12 hours -> 1 USDC