Aave health factor explained

If you borrow on Aave, the health factor is the number to watch. It squeezes your collateral, your debt and the protocol's risk settings into one figure that says how far you are from liquidation.

The formula

health factor = sum of (collateral value x liquidation threshold) / total debt

Everything is measured in the same currency using Aave's price oracles. Each collateral asset has its own liquidation threshold, so a position with several assets adds them up one by one.

Here is an example using the USDC settings on Ethereum Core at the time of writing (September 2026). You supply 10,000 USDC, which has a liquidation threshold of 78%, and borrow another asset worth 5,000 dollars.

10,000 x 0.78 / 5,000 = 1.56

A health factor above 1 means the loan is inside the rules. Below 1, it can be liquidated.

Max LTV vs liquidation threshold

These two settings are easy to mix up. They apply at different moments.

The threshold is normally set a little above the max LTV. That gap is a buffer: even if you borrow the maximum, you do not start at a health factor of exactly 1. In this example, borrowing the full 7,500 gives 7,800 / 7,500 = 1.04. It is a thin buffer, not a comfortable one.

What happens below 1

When the health factor drops below 1, anyone may repay part of your debt and take some of your collateral in return, plus a bonus. There is no warning and no waiting period, and automated bots usually act within seconds. The details are in how Aave liquidations work.

What moves the health factor

• Collateral price falls: the top of the fraction shrinks, so the health factor drops by the same percentage.
• Borrowed asset price rises: the debt is worth more, so the health factor drops.
• Interest accrues: debt grows every second. On its own this is slow, but over months it adds up, and rate spikes speed it up.
• Your own actions: repaying or adding collateral raises it. Borrowing more or withdrawing collateral lowers it.
• Governance changes: Aave governance can change an asset's liquidation threshold, which changes the health factor of everyone using that asset.

For a simple position with one collateral asset and a stablecoin debt, there is a useful shortcut:

price drop to liquidation = 1 - 1 / health factor

At 1.56 the collateral could lose about 36% of its value before the health factor reaches 1. At 1.10 the room is only about 9%.

Thinking about safety margins

There is no universally safe number, and nothing here is financial advice. A few neutral observations help frame the choice:

• How much room you need depends on how far your collateral can move against your debt. A stablecoin borrowed against another stablecoin barely moves. Volatile collateral can fall by double digits in a day.
• The less often you can check the position, the more room a sudden move needs.
• Long-running loans drift downward as interest builds, so a number that looked fine when you opened the loan may not look fine a year later.

To test scenarios, use the health factor calculator. To see the live figure for any address, use the wallet checker. If your collateral and debt move together, E-Mode changes the thresholds used in the formula.