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Overview

Refinancing allows you to extend your loan at maturity or roll to better rates mid-term.

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Auto-Refinance

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How It Works

With auto-refinance enabled:
1

Maturity Approaches

Your loan term is ending
2

Interest Settled

Accrued interest added to principal
3

New Loan Created

System places borrow order at best available rate
4

Seamless Extension

Loan continues without interruption

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Configuration

SettingOptions
Enable/DisableToggle on/off
Rate CeilingMaximum acceptable rate
MaturitySame as original or custom

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Rate Ceiling

Protect yourself from unfavorable refinancing: 
Original Loan: 8% APY
Rate Ceiling: 10% APY

At Maturity:
- If market rate is 9%: Refinances at 9% ✓
- If market rate is 12%: Refinance fails, must repay ✗

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Manual Refinancing

For positions without auto-refinance or when you want to change terms:
1

Before Maturity

Create new borrow order with desired terms
2

When Matched

Use new loan proceeds to repay old loan
3

Result

Single position at new rate/maturity

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Mid-Term Rate Improvement

If rates have dropped significantly:
  1. Check current market rates
  2. Calculate savings vs. effort
  3. If worthwhile, create new loan and repay old
Example:
  • Original: $10,000 at 10% for 6 months remaining
  • New: 7% available
  • Savings: $150 over 6 months
  • Worth refinancing if savings > hassle

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Interest Compounding

Each refinance compounds interest: 
Loan 1: $10,000 at 8% for 90 days
  Interest: $197
  At maturity: $10,197

Refinance (interest added to principal):
Loan 2: $10,197 at 8% for 90 days
  Interest: $200
  At maturity: $10,397

After 1 year (4 refinances):
  Total owed: ~$10,824
  Effective rate: 8.24% (vs 8% simple)

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Health Factor at Refinance

Refinancing affects health factor: 
Before Refinance:
  Collateral: $15,000
  Loan: $10,000
  Health Factor: 1.76

After Refinance (interest added):
  Collateral: $15,000
  Loan: $10,200 (with interest)
  Health Factor: 1.72 (slightly lower)
If health factor is already low, refinancing may push you closer to liquidation. Consider adding collateral before refinancing.

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Auto-Refinance Collateral Top-Up

If health factor is low at refinance:
SettingBehavior
Auto top-up ONProtocol adds collateral from wallet
Auto top-up OFFRefinance may fail if HF too low

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Failed Refinance

What happens if auto-refinance can’t execute:
ReasonOutcome
Rate ceiling exceededNotified, must repay manually
No market liquidityNotified, must repay manually
Health factor too lowNotified, must add collateral
Grace Period: After failed refinance, you have time to repay before liquidation. Don’t ignore notifications!

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Best Practices

Set Rate Ceiling

Protect from refinancing at unexpectedly high rates

Monitor Health Factor

Ensure buffer for interest compounding

Enable Notifications

Know immediately if refinance fails

Plan Ahead

Know your strategy before maturity

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Refinance vs. Repay

ScenarioBest Choice
Need continued leverageRefinance
Rates have risen significantlyRepay if possible
Health factor is marginalConsider repaying to reduce risk
Have cash to repayEvaluate interest savings

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FAQs

Standard protocol fee (0.1% of interest). No special refinance fee.
With auto-refinance, maturity stays same by default. Configure custom maturity in settings.
Rate ceiling prevents refinancing above your limit. Plan for either higher rate acceptance or repayment.