ARTH Guidebook
Borrowing ARTH
As the primary use case of the loans platform, let's see how borrowing works and how you can benefit with it.
ARTH Loans is a borrowing platform for DeFi users.
It offers 0% interest loans & provides a more effective approach to borrowing than other systems such as AAVE, Compound, etc.
One can lock up their crypto assets & borrow ARTH against the collateral. Redeeming a loan position can be done quite easily. You can get your assets back once you repay your position in ARTH valuecoin.

Accepted Assets as collateral

For borrowing; a user has to open a loan position & deposit a certain amount of collateral for it. A user can then, draw ARTH depending upon the collateral ratio they have set. Users can set a collateral ratio of anything up to 110% and above.
Note: A minimum debt of 250 ARTH is required for you to create a loan position. A user also has to set aside $5 for gas fees in case of liquidations.

Collateralization Ratio

Let's understand the collateralization ratio in further detail.
The CR or collateralization ratio is the ratio that determines how much ARTH a borrower will receive for the assets he is willing to collateralize. The CR is set by the user. The minimum CR required is 110%.
Example 1: If user A sets a CR of 110% and creates a position of 10,000$ in ARTH, he would have to at least collateralize 11,000$ worth of collateral. This position is highly prone to liquidation, if the CR% falls below 110%.
Example 2: If user B sets a CR of 150% and creates a position of 10,000$ in ARTH, he would have to at least collateralize 15,000$ worth of collateral. This position is more secure than Example 1.
Thus, a higher CR% means the user's position is less prone to liquidation, but also means that he will receive less ARTH for the collaterallaized position. Whereas a lower CR% means the user's position is more prone to liquidation, he will receive more ARTH for the collateralized position.
The Minimum Collateralization Ratio or MCR is the lowest ratio of collateral that will not trigger a liquidation. This is set at 110% under normal conditions.
Whereas in recovery mode, this MCR is set to 150%. To avoid liquidation during Recovery Mode, it is recommended to keep the ratio above 150%.
As a borrower, you should make sure you are creating positions that are not prone to get liquidated to avoid loss of funds.