# 🎓What is Liquidation Ratio?

Liquidation Ratio is one of the two factors which can lead to auto-liquidation of collateral assets! The other such factor is Loan Duration. Please read and understand this section carefully!

**A liquidation ratio defines at what (Principle + Interest) : (Value of Collateralised Assets) ratio, the collateral might be sold to repay the (Principle + Interest).**

Let's take this example: 15000 USDT was borrowed against 1 BTC. Let's also say, the interest has become 3500 USDT, at a given point, making the total outstanding 18500 USDT. Now, assume that the lender has mentioned a Liquidation Ratio of 80%. So, when 18500 = < (equals or less than) the value of 80% of 1 BTC, the BTC will be sold to pay the lender his funds back. Assume, when the total outstanding is 18500, if the BTC price falls to 23125 USDT or lower, the BTC will be sold in the open market to cover the total outstanding as 80% of 23125 is 18500.

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