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What Happens If I Don't Pay Back My Loan from Compound?

Obtaining a loan often involves paperwork and credit checks, but there are no guarantees you'll be approved. You cross your fingers hoping that you can repay the loan, so your credit score doesn't drop because you defaulted on the loan. Fortunately, you can borrow from the cryptocurrency without hassles. Compound Finance offers users a platform where they link their external wallets to fund assets. You can borrow from yourself later if needed, but what happens if you don't repay yourself?

Adding Assets Review

You have several asset types to choose from, but you can reach out to Compound Finance's help desk if you need help. You link an existing compatible external wallet to Compound. The platform also makes credit checks and KYC unnecessary becasue it depends on an overcollateralization system- depositing more collateral than what you need. Depositing assets is simple:

  1. Go to Compound.finance, then click on the App button near the top right-hand corner.
  2. Make your selection from one of the following wallets: Coinbase Wallet, Ledger, MetaMask, Tally or Wallet Connect.
  3. Make your deposits by following the instructions. You can lend or borrow from any other crypto type after you unlock it from its respective page.

The more assets you add, the greater your borrowing power. Each of your assets is shown in the Supply column and you use the sliders next to each asset type to use them as collateral against your loan. Your Borrow Limit is located to the right of your assets.

Consequences of Non-Payment

Compound does have some safeguards in place in case you don't repay. First, your collateral as the original borrower would be liquidated at a potentially lower market rate to satisfy the loan. Your loan could incur a cost if there's not enough collateral to repay it.

Community members could also act as liquidators using tools, such as Compounder Liquidator browser extension. They benefit from repaying your loan in exchange for collateral at a better market rate.

Repaying Your Loan

Loans on the Compound platform also accrue interest, so repaying them is favorable:

  1. Choose the asset related to the loan that you'd like to repay, and click the Repay tab which is next to the Borrow tab.
  1. Choose Max if you want to repay the full loan balance or enter a smaller amount you'd prefer to repay. Click the Repay button near the bottom of the screen.
  2. Verify the transaction through your digital wallet.

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Jeff truly believes that all customers deserve good service. He’s been building tools, inventing phone tree hacks and helping customers since before his days at GetHuman. He's also a Google GDE and involved in the Angular community.

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Compound

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What happens if I can't repay my Compound Finance loan
Risks of not repaying my Compound loan

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