Borrowing oUSD
Lock ADA in a loan of your own and borrow up to 40% of its value in oUSD. Your ADA stays staked, and you can repay at any time.
#How a loan works
You lock ADA in a loan of your own, on a Cardano contract, and borrow oUSD against it. Each loan is separate: your ADA is never pooled with anyone else's.
When you open a loan, your wallet receives the loan's owner NFT. Whoever holds it controls the loan, so keep it in the wallet you borrowed from.
#The loan level
The loan level is what you owe as a share of your ADA's value. Borrow $400 against $1,000 of ADA and your loan level is 40%.
| Loan level | What it means |
|---|---|
| Up to 40% | The most you can borrow up to, or withdraw ADA down to |
| 40% to 70% | Your loan is safe, but has less room if ADA falls |
| 70% and above | Part of your ADA can be sold to repay the loan (Liquidations) |
Because you can borrow at most 40%, every oUSD starts out backed by at least $2.50 of ADA. Even a loan opened right at the limit only reaches 70% if ADA then falls by about 43%.
Most borrowers stay well below the limit. At a 25% loan level, ADA would have to fall by almost two thirds before your loan reached 70%.
#What you can do
| Action | What it does | Needs a price? |
|---|---|---|
| Open a loan | Locks ADA and borrows oUSD | Yes |
| Borrow more | Borrows more against the same ADA, up to 40% | Yes |
| Add ADA | Lowers your loan level | No |
| Repay | Pays the fee owed first, then reduces what you borrowed | No |
| Withdraw ADA | Takes ADA back, keeping the loan at 40% or below | Yes |
| Close | Repays everything and returns all your ADA | No |
Repaying, adding ADA and closing never depend on prices or the pause, so you can always make your loan safer or end it.
#The smallest loan
A loan must owe at least $100, or nothing at all. There's no minimum amount of ADA. If the minimum is ever raised, a loan already below it can still be repaid, topped up and closed, but can only shrink.
#Your staking rewards
Your loan's ADA is staked with your own stake key, so its staking rewards keep coming to your wallet as before. You can change this at any time, and only you can: nobody else can change how your loan is staked.
A second option is built into the contracts and coming to the app: your loan's own staking account, whose rewards pay your borrow fee automatically, with anything left over added to your loan's ADA.
#What it costs
A borrow fee, charged as a yearly rate on what you borrow and fixed for 90 days at a time. There's no opening fee and no penalty for repaying early. See The borrow fee.