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Example of Borrowing
Following the earlier example, John now wants to borrow CRO instead of redeeming his USDC:
John uses his 5,000 USDC as collateral.
With CRO's Collateral Factor of 75%, the maximum he can borrow is 3,750 USDC worth of CRO.
At the current exchange rate of 0.15 USDC per 1 CRO, this equals 25,000 CRO.
However, John chooses to be cautious and borrows only 12,500 CRO, keeping his collateralization ratio at 50%.
Assuming a 12% annual borrowing APY and constant USDC/CRO exchange rate, after 3 months, the interest adds up to:
12,500 CRO × (12% ÷ 4) = 375 CRO
Total repayment = 375 + 12,500 = 12,875 CRO
Important:
If CRO’s price increases during the loan period, the value of John’s debt rises. If this causes his collateralization ratio to exceed 75%, a liquidation event may occur—part of his loan will be repaid by selling some of his collateral to bring the ratio back within limits.
