When you get an Instant Loan with cryptocurrency as collateral, you need to keep in mind a potential liquidation risk that may occur.

In this article, we will cover all possible liquidation cases and give you detailed explanations.

What is collateral liquidation

Basically, it’s your collateral sale. In case of one of the situations explained below, our system will automatically sell your collateral fully or partially, depending on the case.

Note: We charge a 7% liquidation fee, whether it’s a full or partial liquidation. Please enable email and push notifications in order not to miss any important updates regarding your loan.

What are the collateral liquidation cases

There are three cases when collateral liquidation happens.

⠀⠀1. You don’t make your monthly loan payment

While setting up your loan parameters, you agree that you will have a certain amount of your loan currency to pay monthly.

Note: You can view your payment schedule by selecting Loans, choosing the desired loan, and going to the Repayment Schedule section.

You are supposed to make a repayment on the day of your scheduled payment. If your monthly payment is due on September 1 and you don’t make one, our system will try to make an automatic payment at 0:00 on the next day, September 2. To make it possible, you should have enough funds in your Wallet. If the amount of the loan currency is insufficient to make a payment, the system liquidates a part of your collateral to do this.

⠀⠀2. You don’t make your final loan payment

While setting up your loan parameters, you agree to have a certain amount of your loan currency as a final payment.

Note: You can view your payment schedule by selecting Loans, choosing the desired loan, and going to the Repayment Schedule section.

This is the case for customers who don’t use the full early repayment option and choose to make regular payments until the end of the loan period. If you don’t make a final payment on the due day, our system will try to make an automatic payment at 0:00 of the next day. To make it possible, you should have enough funds in your Wallet. If the amount of loan currency in the Wallet is insufficient to make a payment, the system liquidates a part of your collateral to do this.

⠀⠀3. Margin call

If your collateral’s market value drops significantly or your loan currency value increases but your collateral value stays the same, there is a liquidation risk. See our article about LTV for more details on how it works.

CoinLoan offers 70% as the maximum LTV. When your LTV is 80%, we mark your loan red with a liquidation risk label. When your LTV is 90%, we automatically liquidate your collateral by selling it at a market price.

When your loan’s LTV reaches a dangerous 80% level, you will receive an email with instructions. If you don’t take any suggested measures (adding collateral or making an early repayment), chances are your LTV will quickly reach the crucial 90% level.

Email notification about liquidation risk

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