> For the complete documentation index, see [llms.txt](https://docs.tezos.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tezos.finance/liquidation/collateral-ratio.md).

# Collateral Ratio

The collateral ratio is a safeguard mechanism that ensures the loan remains overcollateralized, meaning the value of the collateral exceeds the loan value. \
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On TezFin, currently, all lending pools have the collateral ratio set at 50%. This means that you can borrow up to 50% of the value of your collateral. If your borrowed amount were to exceed the bounds of your collateral ratio, **your collateral could be liquidated!** \
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**EXAMPLE SCENARIO:** If you deposit $1,000 worth of XTZ as collateral, you could borrow up to $500. 

* If the value of XTZ were to then double (meaning the value of the XTZ that you deposited increased $1000 to $2000) then your borrowing limit would **increase** from $500 to $1000. 
* If, instead of doubling, the value of XTZ were to instead **decrease** to 1/2 (one half) its value (meaning, the value of the XTZ you deposited were to decrease from $1000 to $500), then your borrowing limit would **decrease** from $500 to $250. <br>


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