Glossary
Health Factor
A DeFi lending-position safety metric — ratio of weighted collateral value to debt value. Below 1, the position becomes liquidatable.
On Aave, Compound, and most DeFi lending markets, the health factor expresses how close a borrowing position is to liquidation. It is computed as the sum of each collateral asset's value × its liquidation threshold, divided by the position's total debt value.
A health factor above 1 means the position is solvent under current prices; below 1 means anyone can liquidate it. Borrowers typically aim for 1.5–2.0 to absorb normal volatility without forced unwinding. Health-factor monitoring is a basic part of managing any on-chain leveraged position.