> For the complete documentation index, see [llms.txt](https://defihouse42.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://defihouse42.gitbook.io/docs/protocol/loan-mechanics.md).

# Loan Mechanics

The protocol follows a **simple lifecycle** designed to *maximize clarity*.

## Lender Offer Creation

Lenders define:

* **Loan asset**
* **Principal amount**
* **Duration**
* **Fixed interest**
* **Required collateral ratio**
* **Accepted collateral types**

Offers are published in an **on-chain registry**.

## Borrower Match

Borrowers select an offer and deposit collateral.\
Upon confirmation:

* Collateral is **locked**
* Loan principal is **released**
* A **fixed maturity date** is set

## During the Loan

* **No liquidations**
* Collateral remains **locked**
* *Optional early repayment* (if implemented)

## Settlement

At maturity:

* Borrower repays **principal + interest** → *collateral is returned*
* If **no repayment** → *lender claims collateral*

## Collateral & Risk

### Initial Collateral Types

MVP collateral will be **conservative**:

* **BNB**
* **Stablecoins**
* *Selected blue-chip assets*

### Collateralization Ratios

Set **per asset** and *adjustable by lenders*.\
Initial parameters aim to **minimize under-collateralization risk**.

### Default Handling

Default transfers collateral to the lender as **defined in the loan terms**.