# Glossary of Terms

The information on this page and all other pages owned by, operated by, or related to Hector Network are for educational purposes only and does not constitute any kind of advice. Please read our Disclaimers page first.

### Collateralisation

Collateral is the capital or value put up to secure a loan. For example: when taking a loan of FTM tokens worth \$100 it is common practice to put up tokens of value to secure the loan.
When the value of the collateral is less than the value of the borrowed tokens, this is called an undercollateralised loan. When the value of the collateral is higher than the value of the borrowed tokens, this is called an Overcollateralised Loan.
Overcollateralised Loans are considered safer, and are used by Hector Institute.

### Overcollateralised Loan

Hector Institute offers Overcollateralised Loans. An Overcollateralised Loan is a loan wherein the collateral put up to secure the loan is worth more than the tokens borrowed. The amount of collateral required for a given loan depends upon that token's collateral factor.

### Collateral Factor

The ratio which determines how much collateral is required to take out a loan of a given token. For example, if a user supplies 100 DAI as collateral, and the collateral factor for DAI is 60%, then the user can borrow assets worth 60 DAI (60% of the collateral supplied).
Collateral factors can vary from token to token.

### Liquidation

When the value of a borrowed position exceeds the amount allowed by the collateral factor, liquidation will happen. At Hector Institute, a borrow position will be partially liquidated to rebalance the loan. When a loan is liquidated, a liquidation incentive is also charged to the loan. For wsHEC, this is 12%. For all other loans it is 10%.

### Liquidation Factor

The Liquidation Factor is the rate at which loans are liquidated when they become undecollateralised. Hector Institute has a liquidation factor of 50%. This means that if you borrow tokens, once the value of the loan rises above 50% of the value of the collateral, the loan may be liquidated. The amount of the loan liquidated is determined by the Close Factor.

### Close Factor

The Close Factor is the amount of an undercollateralised loan which is liquidated. Hector Institute has a Close Factor of 50%. This means that in the event of liquidation, 50% of the position will be liquidated to cover the debt.

### Interest

To keep a borrowing position open, an compounding interest rate is applied at each network block. This means that to repay a loan, you will need a larger value of tokens than were borrowed. Interest rates at Hector Institute can vary but are usually about 2%.

### Network Supply Balance

The value of all tokens supplied to the network by all users.

### Network Borrow Balance

The value of all tokens borrowed from the network by all users.

### Assets Utilization

The percentage of assets borrowed from the supply, calculated as:
$(Borrow Balance/Supply Balance)*100$

### Supplied Assets

A breakdown of all the tokens supplied by all users. Hover over the borrowed value to see the percentage of a given token which has been borrowed.