How do liquidations work?

Lava is built to ensure that users have as much protection as possible against having their loans liquidated. On Lava, your loan will only get liquidated if the value of your collateral approaches a point where it cannot cover the total of your balance owed. This is known as your loan-to-value ratio (LTV), which you can see within your app. When you initiate a loan, you’ll also see the BTC price at which a liquidation will happen for your loan, so you can monitor this as well.

Loans on Lava originate at 50% LTV or lower— if your LTV increases, we will send you multiple notifications and warnings. You can add collateral or pay down part of your loan at any point to lower your LTV.

Your loan will not be liquidated if you miss a payment or fail to repay your loan at expiration. Instead, you’ll be charged a late fee until a payment is made.

Lava also offers Liquidation Protection, which automatically adds collateral to your loan from your available bitcoin balance if your LTV exceeds 80%.