# Health factor

We compare the total current debt of the token with underlying loans current value and collateral(s) to determine the health.
$Hf = \frac{C_{cv} + LA_{cv}}{L_{net}}$
where,
$Hf =$
Health factor
$C_{cv} =$
Collateral current value in USD
$LA_{cv} =$
Loan account current value in USD
$L_{net} =$
Net liabilities (Original loan + interest) in USD
Note: For on-chain computations, we use USDT as base value to compute values.
Health is monitored at two levels:
1. 1.
dToken level: Determines the total health of the protocol for this asset
2. 2.
user loan level: Determines health of a user’s individual loan

### dToken health:

$L_{net} =$
total value of the debt issued by the contract across the protocol
$C_{cv} = \Sigma_{1}^{n} C_{icv},$
n is the total number of supported collaterals,
$C_{icv}$
is the net value of the ith collateral locked.
$LA_{cv}$
unspent loan amounts + Sum (spent loan amounts)

### User loan health:

For the above loan discussed, the health factor can be computed as below:
1. 1.
Before partial withdrawl
• $C_{cv} =$
1 ETH * 100 = 100
• $LA_{cv} =$
300 USDC = 300
• Assuming an interest of 2 USDC accrued,
300 + 2 USDC = 302
So, Health factor
$(Hf) =$
(100 + 300)/302 = 1.32

1. 2.
Post spend
$LA_{cv}$
= 3 ETH x $100 =$300
So, Health factor
$(Hf) =$
(100 + 300)/302 = 1.32