Repay with Collateral

Currently on Tectonic, a user needs to repay a loan with the same asset they used to borrow. This means that they need to have a sufficient amount of the asset, plus interest accrued, in their wallet in order to repay the loan. The “Repay with Collateral” feature will now give users two ways to repay his debt: either using tokens in his wallet, or using his deposited collateral.

The latter option reduces the 3 steps it would typically take a user looking to repay with their collateral — withdraw collateral, swap to the loan token, pay off loan — to 1 single transaction.

The goal is to give users more accessible ways to pay back their debt. We aim to make it even easier for users to repay their borrowed assets in a timely manner as it is beneficial to the protocol in helping to contain risks and bolster overall resilience.

How Repay with Collateral works:

Step 1: User confirms to repay debt (token A) with collateral (token B)

Step 2: On the backend, Tectonic will burn the user's tToken B to return the underlying token B. No liquidity check conducted at this point

Step 3: Token B will then be swapped for Token A on the integrated DEX (currently VVS Finance)

Step 4: This newly swapped Token A will be used to repay the user's debt (token A)

Step 5: Liquidity check is conducted