Health factor is a single number that tells you how safe a DeFi borrowing position is from liquidation. On AAVE, Morpho, and Euler, it weighs the value of your collateral against your outstanding debt. Above 1.0 you are safe. At 1.0 you can be liquidated. Below 1.0, liquidation is already happening.
How Health Factor Works
Health factor represents the safety of your borrowing position in one figure.
It compares the value of your collateral to the value of your debt, adjusted for the liquidation threshold of each asset. The higher the number, the more room you have before things get dangerous.
Why Health Factor Changes
Your health factor is not static. It moves constantly, driven by four things:
- Price of your collateral assets going down
- Price of your borrowed assets going up
- Interest quietly accruing on your debt
- Protocol parameter changes
A position that looks perfectly safe today can drift toward liquidation overnight if the market moves against you.
This is exactly why monitoring matters.
Health Factor on Different Protocols
AAVE, Morpho and Euler all use a health factor to measure position safety. The formula is similar everywhere: collateral value (adjusted by liquidation threshold) divided by your debt.
But here is the catch: if you hold positions on several protocols, each one has its own health factor.
A safe position on AAVE does not protect you from a liquidation on Euler. You have to watch them all.
When to Take Action
Most people set mental thresholds for when to step in. The common ones:
- Add collateral when health factor drops below 1.5
- Repay debt when it approaches 1.2
- Close the position entirely if volatility spikes
The hard part isn't setting the threshold. It's knowing the exact moment your health factor crosses it.
Checking dashboards by hand is slow, and easy to forget until it is too late.
Monitoring Health Factor with Otomato
Otomato detects your lending positions on AAVE, Morpho and Euler automatically, no setup required.
When your health factor approaches a risk threshold, you receive an alert with the full context: which position is affected, and how close you are to liquidation.
If your positions are safe, you hear nothing. The moment something changes, you find out immediately.
Start monitoring your positions
Get alerts when your health factor approaches liquidation. No setup required.
Etienne Perche
Product Manager at Otomato. Owns the alert philosophy and the question of what "relevance" means for a notification.
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