Health Factor
In one sentence
Health factor is a single number that measures how close a borrowed position on Aave, Morpho, or Euler is to liquidation. Above 1 the position is safe, below 1 it can be liquidated.
What it actually means
Lending protocols like Aave, Morpho, and Euler let you deposit collateral and borrow against it. Each collateral asset is assigned a liquidation threshold, which is the maximum percentage of its value that can back debt. Health factor is the ratio between the weighted collateral value and the outstanding debt value.
A health factor of 2.0 means your weighted collateral is worth twice your debt. A health factor of 1.1 means your buffer is thin. Below 1.0 your position is undercollateralized and any liquidator can repay part of the debt in exchange for a discount on the collateral.
How it is calculated
The standard formula used across Aave-style protocols is:
All values are denominated in the same unit, typically USD. The liquidation threshold varies per asset (for example 80% for ETH, 87% for stETH, 77% for wBTC on Aave V3 — figures change over time and per market).
Why it matters to you
Health factor changes every block: collateral prices move, borrowed asset prices move, and interest accrues on the debt. A position that looks safe in the morning can be near liquidation by the evening if collateral drops 20%.
- Above 1.5: comfortable for most strategies.
- Between 1.2 and 1.5: you have a buffer but a sharp drawdown can put you at risk.
- Between 1.0 and 1.2: any meaningful price move can trigger liquidation.
- Below 1.0: liquidation can be executed by anyone.
Real example
You deposit 10 ETH (worth $30,000 at $3,000 per ETH) on Aave, with an 80% liquidation threshold. You borrow $15,000 of USDC. Weighted collateral = $30,000 × 0.80 = $24,000. Health factor = $24,000 / $15,000 = 1.6.
If ETH drops to $2,400, your collateral is now worth $24,000, weighted to $19,200. Health factor drops to 1.28. If ETH drops to $1,875, weighted collateral is $15,000 and HF hits 1.0 — liquidation territory.
A health factor of 1.5 means you can lose roughly 33% of collateral value before liquidation. A health factor of 1.2 means you can lose only about 17%.
Common misconceptions
A health factor of 2.0 does not mean "twice as safe" as 1.5 in a linear sense. The relationship between HF and the price drop required to liquidate is non-linear because each asset has its own threshold and the worst-performing collateral dominates. A multi-collateral position can have a comfortable HF and still be one asset shock away from liquidation if one collateral dominates the basket.
Health factor is also not directly comparable across protocols. Morpho markets use isolated parameters per market, so an HF of 1.3 in a high-LLTV market is different from 1.3 in a conservative one. Euler uses borrow factors that further adjust the calculation.
How Otomato monitors it
Otomato detects every lending position you hold across Aave, Morpho, Euler, and others without any setup. The default rule alerts you when health factor crosses configurable thresholds (commonly 1.5, 1.2, and 1.05), and you can tune the trigger per position. No dashboard checking. Silence means your positions are still healthy.
Related terms
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