Your health factor is one number, and it decides whether your Aave position survives the next bad candle. Above 1, you're fine. At or below 1, any liquidator can repay part of your debt and take your collateral at a discount. Everything between your current number and 1.0 is your cushion.
The formula, with real numbers
Aave doesn't simply total your deposits and subtract your debt. Each collateral asset gets weighted by its liquidation threshold, a percentage the protocol sets per asset. Stablecoins often carry a threshold near 0.85; a volatile token might sit closer to 0.75.
Health Factor = (Sum of each collateral × its liquidation threshold) ÷ (Total borrowed value + accrued interest)
That weighting explains why two wallets with identical dollar balances can sit at completely different health factors. A wallet full of stablecoins carries more borrowing power per dollar than one holding a memecoin, because the protocol assumes the memecoin can fall faster.
Deposit size is not the number that matters
Deposit $10,000 of an asset with a 0.80 liquidation threshold and your weighted collateral is $8,000, not $10,000. Borrow $6,000 against it: health factor 1.33. Borrow $7,500 instead: 1.07. Same collateral, same market, two very different nights of sleep.
Interest moves the number while you sleep
Debt grows every block. Even in a flat market, a variable-rate loan erodes your health factor through accrual alone. Leave a large position alone for a few weeks and the number will be lower than you remember.
How a 1.07 became a 0.99
Consider a borrower with $20,000 in ETH as collateral. At a 0.80 threshold, that's $16,000 of weighted collateral. They borrow $15,000 in USDC. Health factor: 1.07.
ETH drops 6%. Collateral is now worth $18,800, weighted to $15,040. Interest has pushed the debt to roughly $15,050. Health factor: 0.99. Liquidated — on a move that barely registered on a daily chart.
Most liquidated borrowers aren't reckless. They're running thin cushions and assuming the market will stay quiet.
What the number looks like at each borrowing level
Health factor is a distance, not a pass/fail grade, and that distance compresses fast near 1. Hold weighted collateral constant at $16,000 and vary only the debt:
| Amount borrowed | Health factor | What it means |
|---|---|---|
| $8,000 | 2.00 | Comfortable. Room for a serious drawdown. |
| $12,000 | 1.33 | Moderate. A 25% collateral drop puts you near liquidation. |
| $14,000 | 1.14 | Thin. Ordinary volatility can trigger a call. |
| $15,500 | 1.03 | Dangerous. You're betting on calm markets. |
The pattern is the point. Moving from 2.00 to 1.33 requires borrowing $4,000 more. Moving from 1.14 to 1.03 requires only $1,500 more — for a fraction of the capital and most of the risk. The last stretch of borrowing is the worst trade on the table.
Safe is a personal number
No universal threshold exists. If you hold volatile collateral and can't watch the market, 1.5 gives you breathing room. Stablecoin collateral with a high threshold might justify a lower number. The right level depends on how fast your collateral can move and how quickly you can respond.
Repaying versus adding collateral
When the number drops, you have two levers. Repaying debt improves the ratio directly and stops interest accruing on that amount. Adding collateral lifts the numerator but leaves the debt untouched. For a fast fix, repaying usually moves the number more per dollar.
Three habits that keep the number healthy
- Borrow well below your maximum. Treating the liquidation threshold as a spending limit is how positions die.
- Set a personal alert above 1.0 — many borrowers watch for 1.2 or 1.3, because by the time you reach 1.0 it's often too late.
- Track the interest. A position that's flat in price can still drift toward liquidation on accrual alone.
None of this demands constant monitoring. It demands picking a number you're comfortable defending and staying under it.
Frequently asked questions
Can my health factor go above 2?
Yes. Borrow very little against solid collateral and your health factor can sit at 3, 5, or higher. There's no ceiling. A high number means you're using a small fraction of your borrowing power — safe, but your capital isn't working very hard.
Does the health factor change if I don't do anything?
It can. Two things move it without any action from you: the price of your collateral and the interest accruing on your debt. Collateral prices fall, debt grows, and the ratio between them shifts. A position can slide toward liquidation during a quiet week.
What happens the moment it hits 1.0?
Once your health factor reaches 1.0 or below, your position becomes eligible for liquidation. Liquidators can repay part of your debt and claim collateral in return, typically at a discount that penalizes you. No warning screen appears — the protocol simply allows it. Staying above 1.0 is entirely your responsibility.
Open your Aave dashboard right now and check the number. If it's under 1.3, decide today whether you're repaying or adding collateral — before the market decides for you.