What is a margin call and how does it work?

What is a margin call and how does it work?

Nebeus loans use cryptocurrency as collateral which is locked to cover the amount of the loan according to your LTV. Collateral is used by the lender as insurance against the loan. When you enter into a loan backed by cryptocurrency you are agreeing to maintain an agreed-upon value. Depending on the Loan-to Value (LTV), this value will change. As an example:

If you are seeking to borrow $2000 at an 80% LTV, you will need to maintain a collateral value of $2500.

In the event, if the value of your collateral approaches a "Margin Call" (Minimum required to secure your loan) you need to increase the value of your crypto, by depositing more collateral. To do that you need to make sure that you select the box "When the crypto prices are falling" before completing your loan as you will not be able to change after. (Adding this feature will increase the interest rate).

If the market increases, the additional crypto is released back to you. To make this happen you need to select the "When the crypto prices are rising" before completing your loan as you will not be able to change after.(Adding this feature will increase the interest rate).

If you do not want to add more crypto to meet the collateral requirements, you have the option to close your loan. If you wish to do so, please contact Nebeus support. If we don’t hear from you our system will automatically liquidate your loan and payback the remaining crypto to your account. Liquidating your crypto refers to the sale of the crypto to pay back the loan, this is our last resort and only do so when completely necessary.

How does Health Loan Monitor work?

As the margin call approaches, the Liquidation Risk will increase. To calculate Liquidation Risk, we use two indicators Exchange rate at the time of loan issued (Initial Rate) and Exchange Rate for Margin Call  (MarginCall Rate). The value of the difference Initial Rate - Margin call Rate = 100% ( Difference Rate Value). As the Liquidation Risk increases, the Difference Rate Value will decrease. Upon reaching the Difference Value of 20%, we inform you about the threat of Liquidation Risk.

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