Borrowing with $BREAD Collateral
After acquiring $BREAD tokens, you can use them as collateral to borrow $BERA without selling your $BREAD. This allows you to maintain exposure to the appreciating value of $BREAD while accessing liquidity when you need it.
Standard borrowing (Borrow Against Bread)
Standard borrowing enables you to use your existing $BREAD tokens as collateral to borrow $BERA. BakerDAO offers a uniquely high loan-to-value ratio of 99%, meaning you can borrow up to 99% of your $BREAD's value in $BERA.
Key Benefits of Borrowing
Access Liquidity Without Selling: Maintain your exposure to $BREAD's appreciation while accessing $BERA
No Market-Based Liquidations: Loans cannot be liquidated due to market price fluctuations, you can only lose your collateral if you do not pay back a loan in time
High Loan-to-Value Ratio: Borrow up to 99% of your $BREAD's value
Fixed Interest Upfront: No surprise fees or compounding interest
Borrowing Mechanics
When you borrow using $BREAD as collateral:
Your $BREAD tokens are locked in the protocol as collateral
You receive $BERA tokens (minus interest) in your wallet
The loan has a fixed duration that you select (1 to 365 days)
You must repay the exact borrowed amount before the expiration date
Upon repayment, your $BREAD collateral is returned to your wallet
Step-by-step borrowing guide
1. Navigate to the Borrow Page
Access the "Borrow & Loop your asset" page from the main navigation menu.
2. Select Standard Borrowing Mode
On the Borrow & Loop page, you'll see two tabs at the top: "Borrow Against Bread" and "1 click Loop with Bera"
Ensure "Borrow Against Bread" tab is selected for regular borrowing
3. Enter Borrow Amount
In the "You borrow" field, enter the amount of $BERA you wish to borrow
The interface displays your current "Max borrowable" amount, calculated as 99% of your $BREAD's value in $BERA
Use the "HALF" button to set the amount to half your maximum borrowable amount
Use the "MAX" button to set the amount to your full borrowable limit
4. Set Loan Duration
Use the horizontal slider to select your desired loan duration (1 to 365 days)
You can also use the "MIN" and "MAX" buttons to quickly set the shortest or longest duration
5. Review Complete Loan Details
Before proceeding, carefully review all loan parameters displayed below the slider:
Expiration Date: The exact date and time when your loan must be repaid
Collateral Required: The amount of $BREAD that will be locked as collateral
Loan Amount: The actual amount of $BERA you're borrowing
Interest Fee: The total interest charged for your loan (paid upfront)
Total Received (after fee): The net amount of $BERA you'll actually receive after interest deduction
6. Confirm and Execute Transaction
Click the "Borrow" button at the bottom of the interface
Your wallet will prompt you to confirm the transaction
After confirmation:
Your $BREAD collateral will be locked in the protocol
The borrowed $BERA (minus interest fee) will be sent to your wallet
Understanding Loan Terms & Conditions
BakerDAO's borrowing mechanism has several unique characteristics that differentiate it from other DeFi lending protocols.
Interest Rate Structure
Upfront Interest Payment: All interest is collected when the loan is initiated
Interest Calculation:
Interest Fee = Borrowed Amount × APR × (Loan Duration in Days / 365)Base APR: 6.9% annually
Minimum Interest Fee: The protocol enforces a minimum interest fee equivalent to the
burnFee - overCollateralizationAmount. See Interest Feesfor more details
Loan Duration and Expiration
Fixed-Term Loans: All loans have a fixed duration set at creation (1 to 365 days)
No Automatic Rollover: Loans must be explicitly repaid or extended before expiration otherwise they are liquidated
Midnight Cutoff: Loan expiration is processed at 00:00 UTC on the expiration day
Managing active loans
Once you have an active loan, it will be displayed prominently in the "Active Position" section of the Borrow page.
When interacting with your active position, you have several management options:
Free Collateral
If your loan is over-collateralized (meaning you have more collateral locked than the minimum required for your loan amount), you remove some collateral, or you can increase your borrowed amount
Click on your active position to access management options
Select "Remove Collateral" option
Enter the amount of collateral you wish to remove
Confirm the transaction
Select "Increase Borrow" option
Enter the additional amount you wish to borrow
Confirm the transaction
As $BREAD rises in $BERA value, more free collateral will become available to users over time
Extend Loan Duration
To extend your loan's expiration date:
Click the "Extend" button on your active position
Select additional days to extend your loan
Review the additional interest fee required
Confirm the transaction to extend your loan
Borrowing FAQ
Q: How much can I borrow against my $BREAD?
A: You can borrow up to 99% of your $BREAD's value in $BERA. For example, if your $BREAD is worth 10 $BERA, you can borrow up to 9.9 $BERA.
Q: Can my loan be liquidated if the price of $BREAD drops?
A: No. Unlike most DeFi protocols, Baker DAO loans cannot be liquidated due to price fluctuations. The only way to lose your collateral is by failing to repay your loan by the expiration date.
Q: Can I repay my loan early?
A: Yes, you can repay your loan at any time before the expiration date. However, since interest is paid upfront, there's no interest savings for early repayment.
Q: What happens if I don't repay my loan in time?
A: If you fail to repay by the expiration date, your entire $BREAD collateral will be burned during the daily toast process at midnight UTC.
Q: Can I extend my loan if I need more time?
A: Yes, you can extend your loan by clicking the "Extend" button on your active position. You'll need to pay additional interest for the extension period.
Q: Can I have multiple loans at once?
A: No, you can only have one active loan position at a time. You must close your existing loan before opening a new one. But you can add to your borrowed amount if you are still within your max borrowable.
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