Loan Payback
Mechanics of the Loan Payback
Users experience enhanced flexibility and peace of mind when borrowing through the Demiourgos Lending Platform, minimizing the risk of liquidation.
Payment Amount
Computed using the Present Value Variant of the Annuity Formula, the Payment Amount is a fixed amount of USDC, that must be paid at the minimum once each Payment Period. This keeps the Loan safe from any Liquidation.
Elite Period
Each loan is eligible for an Elite Period, which precedes the commencement of Repayment Intervals. This exclusive timeframe is reserved for completed Elite Accounts, beginning with Tier 1. For instance, a completed Tier 2 Elite Account is entitled to a 50 hours Elite Period. Throughout this period, the loan does not accrue interest, and any payment made reduces the Principal. Essentially, the Elite Period provides a window during which the loan can be fully paid with zero interest. Payment made in the Elite Period reducing the Principal borrowed also reduce all subsequent Payment amounts.
Payment Period
If the loan remains unpaid at the conclusion of the Elite Period, the Repayment Intervals commence, marking the beginning of the Payment Period. Completed Elite Tiers (cET) benefit from slightly extended Repayment Intervals, for example, a completedTier 3 Elite Account boasts a repayment interval of:
27 hours instead of 24 hours, for the Daily Loan (1h extra for each cET)
810 hours instead of 720 hours, for the Monthly Loan (30h extra for each cET)
Scaling will be more granular with the introduction of DEB v2.0 as described here.
Throughout the Payment Period, the loan can exist in one of two states:
Safe Status
Maintaining financial stability is assured when a payment equivalent to the Payment Rate is met at a minimum during each Repayment Interval, preventing the loan from being subject to liquidation and deeming it in a secure state. Once a payment equal to the Payment Rate is rendered within a Repayment Interval, that specific interval is considered settled. To achieve a fully paid Repayment Interval, all preceding Repayment Intervals must also be settled.
The threshold for the Safe State marks the commencement of the subsequent unpaid Repayment Interval. It's worth noting that exceeding the Payment Rate with higher USDC amounts is permissible. This action not only fulfils multiple Repayment Intervals at once but also extends the Safe State threshold further into the future.
Each loan will prominently display the remaining time until its Safe State expires.
Unsafe Status
During the Payment Period, borrowers have the option to defer payments (not pay). However, if a Repayment Interval expires without payment, the loan transitions into an insecure state, known as the Unsafe State. In this phase, two significant events unfold:
The Remaining Principal incurs a penalty, termed the Principal Penalty, equivalent to the Daily/Monthly Interest Rate. This penalty accumulates additively with each unpaid Repayment Interval that has elapsed.
While the loan remains in the Unsafe State, there is a risk of liquidation if its Health Factor falls below 1.
To restore the loan from an Unsafe State to a Secure State, the user must settle all outstanding unpaid Repayment Intervals and clear the Principal Penalty.
Health Factor
Every loan is assigned a Health Factor, as per the following formula:
However, the Health Factor's significance comes into play exclusively when the loan is in an Unsafe State. In a Safe State, the loan remains immune to liquidation, irrespective of its Health Factor being below 1:
HF < 1.00 (Red) - The loan will face liquidation and be transferred to Graced Period Loans, if it is in an Unsafe State.
1 <= HF < 1.5 (Orange) - The loan should be closely monitored if it is in an Unsafe State.
1.5 <= HF (Green) - The loan is secure and not susceptible to liquidation, even when in an Unsafe State.
Once a loan in an Unsafe State sees its Health Factor drop below 1, it will undergo liquidation and be moved to Graced Period Loans.
During the Unsafe Status, the Weak Liquidation Threshold is used for computing the Health Factor.
Grace Period
Loans susceptible to liquidation due to a diminished Health Factor or expiration (without redemption before the loan deadline) seamlessly move into the Graced Period Loans category.
Users are afforded a redemption window lasting up to:
12 Hours with 1 Extra hour for each Elite Account Tier (DEB v1) or each Major Elite Account Tier (DEB v2), for the daily Loan.
72 Hours with 3 Extra hours for each Elite Account Tier (DEB v1) or each Major Elite Account Tier (DEB v2), for the monthly Loan.
Within this redemption timeframe, users can restore their loans by satisfying the outstanding components, which include the Remaining Principal, Principal Penalty, and Remaining Interest. Additionally, a Liquidation Fee is applicable, ranging from:
10% to 3% (with a 1% reduction per completed Elite Account Tier) of the (outstanding Principal Value + outstanding Interest + outstanding Principal Penalty - existing when entering the Grace Period), provided the Graced Health Factor doesn't drop below 1.00 (see below); in DEB v1.0
10% to 1% in the DEB v2 system, with higher percentual granularity as depicted below:
| ST | T1 | T2 | T3 | T4 | T5 | T6 | T7 |
|---|---|---|---|---|---|---|---|
nT0 | 10% | ||||||
nT1 | 10% | ||||||
ST1 | 9.75% | 8.00% | 7.00% | 6.00% | 5.00% | 4.00% | 3.00% |
ST2 | 9.50% | 7.95% | 6.95% | 5.95% | 4.95% | 3.95% | 2.80% |
ST3 | 9.25% | 7.90% | 6.90% | 5.90% | 4.90% | 3.90% | 2.60% |
ST4 | 9.00% | 7.80% | 6.80% | 5.80% | 4.80% | 3.80% | 2.40% |
ST5 | 8.75% | 7.60% | 6.60% | 5.60% | 4.60% | 3.60% | 2.20% |
ST6 | 8.50% | 7.40% | 6.40% | 5.40% | 4.40% | 3.40% | 2.00% |
ST7 | 8.25% | 7.20% | 6.20% | 5.20% | 4.20% | 3.20% | 1.00% |
Should users fail to redeem their loans during the Grace Period , the loan undergoes complete liquidation. Complete liquidation entails the company retaining the loan collateral.
Instant Liquidation during the Grace Period
In the context of the Grace Period, a distinct metric known as the Graced Health Factor becomes operative, and its computation involves the application of the Strong Liquidation Threshold. Should the Graced Health Factor register a decline below 1.00, the Grace Period is abruptly terminated, leading to an immediate initiation of the loan final liquidation process.
Liquidation Thresholds
Weak Liquidation Threshold is set at 0.75 (75% of the Asset Value). The Weak Liquidation Threshold is used for computing the Health Factor.
Strong Liquidation Threshold is set at 0.85 (85% of the Asset Value). The Strong Liquidation Threshold is used for computing the Health Factor.
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