Collateralization Ratio Calculator
The collateralization ratio (CR) is the fundamental safety metric for any DeFi lending position. It measures how much collateral you hold relative to the value of your outstanding debt. A higher CR means your position is safer; a CR at or near the protocol's liquidation threshold means you risk having your collateral seized. The formula is straightforward: CR = (Collateral Value / Debt Value) * 100. For example, depositing $3,000 of ETH and borrowing $1,000 of DAI gives a 300% CR. This calculator also shows how much further your collateral can drop in price before your position reaches a user-specified liquidation threshold.
Collateralization ratio formula
CR (%) = (Collateral Value / Debt Value) * 100
Price Drop Buffer (%) = 1 - (Liquidation Threshold / CR)
The price drop buffer tells you by what percentage your collateral price can fall before you reach the liquidation threshold. For example, a CR of 300% with a 150% threshold gives a buffer of 50%: your collateral can lose half its value before liquidation.
CR guidelines by collateral type
- Stablecoins as collateral: protocols often allow higher LTV (lower CR) because price volatility is minimal.
- ETH: MakerDAO requires a minimum liquidation ratio of 145% for ETH-A vaults (as of documentation). Prudent users maintain 200%+.
- Volatile altcoins: protocols typically require 175-300% minimum CR due to higher volatility.
- Monitoring tools: set price alerts when your CR drops to 150% of the liquidation threshold so you have time to add collateral or repay debt.
Collateralization ratio: frequently asked questions
What is a collateralization ratio in DeFi?
The collateralization ratio (CR) is the ratio of the value of your collateral to the value of your debt: CR = Collateral Value / Debt Value * 100. A CR of 200% means your collateral is worth twice your debt. Most DeFi protocols require a minimum CR of 110-150% to avoid liquidation.
What CR should I maintain to stay safe?
Each protocol specifies a minimum liquidation threshold (e.g., 150% on MakerDAO for ETH). It is prudent to maintain a CR well above the minimum, such as 200-300%, to provide a safety buffer if collateral prices drop. The closer you are to the minimum, the higher your liquidation risk.
What happens if my CR falls below the minimum?
When your CR falls below the protocol's liquidation threshold, your position becomes eligible for liquidation. A liquidator repays part of your debt and receives a portion of your collateral at a discount (the liquidation penalty), reducing your collateral further.
How does collateral price drop affect my CR?
Because the debt value is typically fixed in a stablecoin, a drop in collateral price directly reduces your CR. For example, if ETH falls 20% and your debt is fixed in DAI, your CR falls by 20%. This is why volatile assets require higher initial CRs.
What is an over-collateralized loan?
An over-collateralized loan requires collateral worth more than the loan itself, which is standard in DeFi. Because smart contracts cannot assess creditworthiness, they require excess collateral to ensure the protocol can recover funds even if prices fall.
Official sources
- MakerDAO: MakerDAO Documentation.
- Aave: Aave Protocol FAQ.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.