> For the complete documentation index, see [llms.txt](https://zona.gitbook.io/zona-documentation/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://zona.gitbook.io/zona-documentation/zonalend/borrowing.md).

# Borrowing

## What is RWA Borrowing? <a href="#what-is-fixed-rate-borrowing" id="what-is-fixed-rate-borrowing"></a>

ZonaLend allows users who have supplied assets as collateral to take out an overcollateralized loan. &#x20;

## Who is borrowing on ZonaLend designed for? <a href="#who-is-fixed-rate-borrowing-designed-for" id="who-is-fixed-rate-borrowing-designed-for"></a>

Borrowing on ZonaLend is designed for:

1. RWA investors seeking utility for their idle RWA tokens. One such use-case is to deposit RWAs as collateral to take out an overcollateralized stablecoin loan. The loaned capital can then be used for other investments or perform leveraged looping on the same asset, allowing users to earn enhanced yield.
2. DeFi users who want to short certain RWAs. Using real estate as an example, users can deposit stablecoins as collateral and borrow tokenized properties. If the price of the property falls, the user profits as the value of the debt that needs to be repaid has decreased.

## Are there any fees associated with borrowing? <a href="#transaction-fees" id="transaction-fees"></a>

Yes, users must pay interest to asset suppliers when they take out a loan. The interest will vary based on the utilization of the market in question, where a utilization rate of 80% will result in a higher interest rate than a utilization rate of 50%.&#x20;

The majority of the interest paid will be accrued by the depositors of that market, with Zona taking a small cut as protocol revenue. The cut will differ based on the market, and will be determined by the market's specific Reserve Factor.

## Liquidations <a href="#what-is-liquidation" id="what-is-liquidation"></a>

When the value of a user's collateral on ZonaLend falls below the liquidation threshold, a liquidation is triggered where a portion of the user's collateral is sold to a liquidator at a discount to its market value. The proceeds are then used to repay the user's debt, protecting lenders and preventing bad debt from being accrued by the protocol.

Note that RWA liquidations on ZonaLend are an entirely onchain process and do not involve any offchain redemptions. The logic is similar to a Lido stETH liquidation on Aave, where liquidations occur onchain without staked ETH withdrawals from validators.&#x20;


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