Loan liquidation may happen in two scenarios:
1. User initiates loan liquidation manually
This may be done at any time. This means collateral (BTC or ETH) locked by the user in order to create a loan is sold on Exchange until the loan amount is reached. At that point, the Loan is closed and the remaining assets (cryptocurrency BTC or ETH and Fiat money difference) are deposited to the user’s account.
2. Automatic Loan liquidation
Prior to automatic liquidation, the user will receive two email notifications about the collateral value drop, and he or she will be able to react accordingly; pay off or liquidate their loan.
However, a third email notification will be sent when automatic liquidation begins.
- When does this happen?
In the case where the loan amount and collateral value reach a 150% ratio (collateral Euro value drops to 150%).
- Why does this happen?
Since the collateral deposited by the user is kept in a volatile asset – cryptocurrency (ETH or BTC), the collateral Euro value with time changes – and it can also drop to 150%.
Please note: ICONOMI always looks at the value of collateral (BTC or ETH ) in Euros, since the loan was granted for the user in Euros. Meaning that, when changes happen on the market (when Euro price for BTC or ETH changes), the collateral value changes as well.
- How is the automated Loan Liquidation executed?
The loan is automatically liquidated by ICONOMI in order to cover the loan amount as fast as possible. Once the loan amount is covered by selling the collateral (BTC or ETH), the loan is closed and the remaining assets/collateral (BTC or ETH) is unlocked and returned/deposited to the user’s account.