Health Factor in DeFi Lending: Formula and Liquidation Price

A health factor is a single number that tells you how close a DeFi loan is to liquidation: above 1 the position is safe, and at or below 1 it can be liquidated. It is calculated as the value of your collateral, multiplied by its liquidation threshold, divided by the value of your debt. Aave's help centre gives the formula as: Health Factor = (Total Collateral Value × Weighted Average Liquidation Threshold) / Total Borrow Value.

The liquidation price is the other side of the same coin: the collateral price at which your health factor hits exactly 1. This guide shows how both are calculated, works through an example, explains what happens during a liquidation on Aave and on Sui lenders such as NAVI, Suilend and Scallop, and covers the practical ways to keep your health factor up.

The health factor formula

Three inputs drive every health factor:

• Collateral value: the current market value of what you supplied, priced by the protocol's price oracle.
• Liquidation threshold: a percentage set per asset by the protocol. It is the share of collateral value your debt may reach before the position can be liquidated. Volatile assets get lower thresholds.
• Debt value: everything you have borrowed, including interest that has built up.

So: Health factor = (collateral value × liquidation threshold) ÷ debt value.

Aave's own example: supply $10,000 of ETH with an 80% liquidation threshold, borrow $6,000 of GHO, and your health factor is 10,000 × 0.80 ÷ 6,000 = 1.33.

If you have several collateral assets, each is multiplied by its own threshold and the results are added together. NAVI's liquidation docs write it as the sum of each supply in USD times its liquidation threshold, divided by total borrows in USD.

Liquidation threshold vs LTV

These are easy to confuse. The loan-to-value (LTV) ratio is the most you can borrow when opening or increasing a loan. The liquidation threshold is higher, and it is the line where liquidation starts. NAVI's docs describe the gap between the two as your safety buffer: for example, an asset might allow borrowing up to 75% LTV but only become liquidatable at 80%. Our guide to crypto loan LTV covers this in more depth.

How to calculate your liquidation price

For a simple position with one volatile collateral asset and a stablecoin debt, set the health factor to 1 and solve for the price:

Liquidation price = debt value ÷ (collateral amount × liquidation threshold).

Suppose you supply 4 ETH at $2,500 each, which is $10,000 of collateral, with an 80% liquidation threshold, and borrow $6,000 of a stablecoin. The liquidation price is 6,000 ÷ (4 × 0.80) = $1,875. ETH can fall 25% before the position becomes liquidatable. These numbers are illustrative, not current prices.

Two things move the liquidation price over time, even if you do nothing. Interest adds to your debt every block, which slowly raises the liquidation price. And if you borrowed a volatile asset rather than a stablecoin, a rise in the borrowed asset's price hurts you in the same way a fall in collateral does.

What happens when the health factor drops below 1

Once a position is liquidatable, anyone can repay part of the debt on your behalf and take an equivalent amount of your collateral plus a bonus. Liquidations are permissionless and usually done by bots. How much can be liquidated at once, and how big the bonus is, depends on the protocol:

• Aave. Up to 50% of total debt can be liquidated when the health factor is above 0.95 and both collateral and debt are at least $2,000. Up to 100% can be liquidated when the health factor is 0.95 or below, or either side is under $2,000. The liquidator receives a liquidation bonus from your collateral (Aave help centre).
• NAVI (Sui). Up to 35% of the borrower's debt, depending on the token, is repaid per liquidation, and the equivalent value plus a liquidation fee is taken from collateral. Penalties vary by asset (NAVI docs).
• Suilend (Sui). Suilend shows a "Health Bar" against a liquidation threshold line. Its liquidation docs say liquidators repay 20% of your loans per liquidation and collect an extra 5% on that amount as a bounty.
• Scallop (Sui). Scallop uses a "Risk Level" instead, which is weighted debt divided by collateral value for liquidation, so it is effectively the inverse of a health factor. A risk level of 100% or more is liquidatable. Its soft liquidation caps each call at 20% of total debt.

A partial liquidation usually leaves you with a higher health factor than before, but you lose the bonus paid to the liquidator. Using the example above with Aave-style rules and an illustrative 5% bonus: if ETH drops to $1,850, the health factor is about 0.99. A liquidator repays $3,000 of debt and takes $3,150 of ETH (about 1.70 ETH). You are left with about 2.30 ETH (worth about $4,250) and $3,000 of debt, a health factor of about 1.13. The $150 bonus is your loss. For the full mechanics, see DeFi loan liquidations explained.

What is a safe health factor?

There is no universal safe number. Aave says so directly: it "depends on the volatility and correlation of your assets," and lower health factors may be acceptable for correlated pairs such as stablecoins against stablecoins or ETH against ETH-based tokens.

A practical way to choose is to ask how big a price drop you want to survive without acting. With a single volatile collateral and a stablecoin debt, the price fall to liquidation is roughly 1 − 1 ÷ HF:

• HF 1.25 survives about a 20% fall.
• HF 1.5 survives about a 33% fall.
• HF 2.0 survives about a 50% fall.

Crypto assets can move 20% in a day, and oracle updates and network congestion can make it hard to react in time. If you borrow against volatile collateral, a health factor well above 1.5 gives you more time to react; correlated pairs can run lower.

How to raise your health factor

Aave lists the two direct levers: supply more collateral or repay part of the debt. In practice you have five options:

1. Repay debt. The most effective move, because it lowers the denominator. Even a partial repayment helps.
2. Add collateral. Deposit more of the same asset or another asset accepted as collateral.
3. Swap to less volatile collateral. Assets with higher liquidation thresholds and lower volatility support more debt.
4. Use correlated pairs. Modes such as Aave's E-mode or SparkLend's E-Mode raise borrowing power when collateral and debt move together, for example ETH against wstETH, or stablecoin against stablecoin.
5. Close the position. If you can't watch it, unwind it.

Watch the market as well as your own numbers. When a lending pool's utilisation rate spikes, borrow rates jump and your debt grows faster.

Setting health factor alerts

Don't rely on checking a dashboard. Several lenders offer built-in notifications. Scallop's guide to avoiding liquidation describes alerts by email or Telegram, through Notifi, when your risk level crosses a threshold you choose, such as 70%. Spark offers a Notification Center for position changes. Third-party portfolio trackers and bots can also watch positions across protocols. Set your alert well before the danger zone, so you have time to act.

Where JewelSwap fits

JewelSwap's leveraged farms use the same idea under different names. On Sui, its Scallop yield farms borrow through Scallop at a 65% collateral weight, for about 2.86x leverage and a 35% buffer before the liquidation threshold. The docs warn that borrow interest accrues continuously, so the collateral ratio drifts toward the threshold even when prices are flat. On MultiversX, JewelSwap's farms show a "Safety Buffer", the percentage a position can lose before liquidation, rather than a health factor. If you compare lenders on Sui, see our Sui lending protocols comparison.

Frequently asked questions

What is a health factor in DeFi?

A health factor measures how safe a DeFi loan is. It equals collateral value multiplied by the liquidation threshold, divided by debt value. Above 1 the loan is safe; at or below 1 it can be liquidated. Higher numbers mean a bigger buffer against price moves.

How do you calculate a liquidation price?

For one collateral asset and a stablecoin debt, divide the debt by the collateral amount times the liquidation threshold. For example, 4 ETH with an 80% threshold and $6,000 of debt gives 6,000 / (4 × 0.80) = $1,875.

What happens if my health factor goes below 1?

Your position becomes open to liquidation. A liquidator repays part of your debt and receives an equal value of your collateral plus a bonus. On Aave up to 50% of debt can be liquidated at once, or up to 100% if the health factor is 0.95 or lower.

What is a good health factor?

There is no universal safe level. It depends on how volatile and correlated your assets are. As a rough guide, a health factor of 1.5 survives about a 33% fall in a single volatile collateral, and 2.0 survives about 50%. Correlated pairs can safely run lower.

How can I increase my health factor?

Repay part of your debt, add collateral, switch to less volatile collateral, or use a correlated-asset mode such as E-mode where available. Repaying debt usually has the biggest effect for the money spent.

Is Scallop's risk level the same as a health factor?

It measures the same thing the other way round. Scallop's risk level is weighted debt divided by collateral value for liquidation, so a risk level of 100% corresponds to a health factor of 1, and liquidation can start at or above that level.

Keep reading

• DeFi loan liquidations explained
• Crypto loan LTV explained
• Sui lending protocols compared
• Utilisation rate in DeFi
• What is a price oracle?

This article is educational and isn't financial advice. Formulas, liquidation rules and alert features are from Aave, NAVI, Suilend, Scallop, Spark and JewelSwap documentation as checked on 9 October 2026; worked examples use illustrative prices and an illustrative liquidation bonus, not live market data. Protocol parameters change through governance, so check each app before borrowing.