Managing a Loan Position
This section explains what actions are available for a user to manage a loan
Managing loans in Concrete
Once a loan is taken through Concrete, users can perform the main actions that they would be able to in the lending platform for the different loan posittions they have opened, all from one place.
Loan health
According to the LTV level of a loan, loans will be classified in 3 levels::
This level is for loans that are in good standing and their probability of foreclosure is low. This level is represented with the color green.
This level is for loans that are in fair standing and the probability of foreclosure is moderate. This level is represented with the color amber.
This level is for loans that are in bad standing and probability of being foreclosed is high. This level is represented with the color green.
In upcoming versions of the probability engine, the evaluation of the loan health will incorporate forecasts of collateral asset price depreciation and other factors.
What actions can a borrower perform on their loan positions?
Depending on the status of a loan, users can perform different actions from the loan portfolio and individual loan views on the UI.
Unprotected Loans
Deposit collateral
Withdraw collateral (subject to Concrete's foreclosure LTV threshold)
Borrow (subject to Concrete's foreclosure LTV threshold)
Repay borrowings
Close the loan
Protect the loan
Protected Loans
Once a loan is protected in Concrete, borrowers are limited with the actions that they can perform on their loan position.
In protected loans borrowers can't modify their position, this is due to the fact that, after a loan is protected, modifying the position by increasing the LTV would affect the risk profile of the protected loan.
These actions are not allowed for protected loans:
Deposit collateral
Withdraw collateral
Increase borrwings
Partially repay borrowings
These are the allowed actions for protected loans:
Close the loan: When a user wants to repay the full loan, they need to repay any outstanding credit and the loan amount. The policy is canceled in the same act, with a cancelation fee charge (see cancel protection), and all of the collateral is returned to the user.
Repay credit: While the policy is active and disbursements have been made, the user can repay the owed protection credit. There is a special rule for this action. As the disbursements are done in the collateral base and the credit line is in stablecoin, when repaying, the user has to always repay, at a minimum, the nominal disbursed amount in USDC or the equivalent in USDC that represents the nominal amount of collateral disbursed. Whatever guarantees that the LP can be made whole or even obtain an upside when repayment is done in a moment that the price of collateral decreased.
Cancel protection: Users can cancel protection at any time before it expires. In general, a cancelation fee is charged to the user that is deducted from their loan position directly. There are some cases where the cancelation fee is not charged or a reduced cancelation fee is charged. When a user requests to cancel a protection plan, the system will evaluate, if there are is no credit owed, what is the probability of a claim during the remaining time of the protection and quote the corresponding canceling fee.
For v1 we will implement a simplified version where we will classify loan health in 3 levels: 1 2 3 (red). If at cancelling time loan health level is:
1: the protection is canceled with no charge (this frees up idle capital from the protocol vaults that can be used to protect more loans)
2: the protection is canceled and user pays a 50% reduced cancelation fee
3: the protection is canceled and user pays 100% of the cancelation fee
If there are credits owed, the user will first have to repay the debt, then a cancelation fee is charged and the protection plan is canceled. That loan remains in the platform as an unprotected loan.
Extend/Renew protection: TBD
Last updated