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    Crypto Lending Glossary: LTV, APY, Utilization and Other Key Terms

    Crypto lending has its own vocabulary. These are the terms you will meet on almost every lending and borrowing platform, explained in plain language.

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    Loan and collateral terms

    • Collateral: assets locked to secure a loan.
    • Loan-to-value (LTV): loan amount divided by collateral value.
    • Maximum LTV / collateral factor: the most you can borrow against an asset.
    • Liquidation threshold: the LTV at which collateral is sold.
    • Liquidation penalty / bonus: the discount liquidators receive, paid by the borrower.
    • Health factor: a score some protocols use; below 1 the position can be liquidated.
    • Margin call: a warning to add collateral or repay before liquidation.

    Rate terms

    • APR: simple annual interest rate.
    • APY: annual rate including compounding.
    • Variable rate: changes with market conditions.
    • Fixed rate: stays the same for an agreed term.
    • Utilization: the share of a pool that is borrowed; drives rates in most DeFi pools.

    Platform and risk terms

    • CeFi / DeFi: centralized company vs decentralized smart contracts.
    • Oracle: a service that feeds prices to a protocol.
    • Bad debt: debt no longer covered by collateral.
    • Rehypothecation: a lender reusing your collateral.
    • Depeg: a stablecoin trading away from its target price.
    • Undercollateralized loan: a loan backed by less collateral than its value, relying on credit assessment.
    • First-loss capital: funds that absorb losses before other lenders in a credit pool.

    On-chain credit terms

    • Underwriter: the party that assesses borrowers.
    • SPV: a special purpose vehicle that holds loans or claims for lenders.
    • Tranche: a layer of a pool with its own risk and return.
    • Real-world assets (RWA): off-chain assets such as loans or bonds represented on-chain.

    Back to crypto lending basics.

    Frequently asked questions

    A number some DeFi protocols use to show how safe a loan is; below 1 it can be liquidated.

    APY includes compounding; APR does not.

    The share of a lending pool that is currently borrowed.

    This page is for educational purposes only and is not financial, investment or tax advice. Crypto assets are volatile; you can lose all of your money.

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