> ## Documentation Index
> Fetch the complete documentation index at: https://docs.creda.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Liquidations

> Understand how liquidations work on Creda Finance and how to avoid them

Liquidations protect lenders and keep the protocol solvent. When a position’s health factor falls below 1.0, liquidators can repay part of the debt and receive collateral at a discount.

## When It Triggers

```
Health Factor = (Collateral Value × Liquidation Threshold) / Total Debt
Liquidatable when Health Factor < 1.0
```

Common causes: collateral price drops, interest accrual on debt, or parameter changes.

## What Happens

* A liquidator repays a portion of the borrower’s debt (up to the close factor)
* The liquidator receives collateral with a small discount (liquidation bonus)
* The borrower’s debt and collateral both decrease; health factor typically recovers above 1.0

Full liquidations are rare and occur only when a position is far underwater.

## How To Avoid It

* Keep buffers: target a health factor well above 1.0 (e.g., 1.5+)
* Monitor assets: set alerts for price moves and HF thresholds
* Size sensibly: avoid maxing out LTV, especially on volatile assets

If your health factor approaches 1.0, you can add collateral, repay part of the debt, or reduce exposure.

## Terms At A Glance

* Close factor: maximum share of debt that can be repaid in one liquidation
* Liquidation threshold: collateral value multiplier used in HF
* Liquidation bonus: discount applied to collateral given to liquidators

Understanding these mechanics helps you plan buffers, react faster, and avoid forced sales.