What Happens When Aave Health Factor Reaches 1?
When your Aave Health Factor reaches or falls below 1.0, your loan position becomes insolvent and becomes eligible for public liquidation by liquidator bots.
The Mechanics of an Aave Liquidation
Aave relies on third-party liquidators (automated bots) to maintain protocol solvency. When a position’s Health Factor drops below 1.0, liquidators step in to repay up to 50% of the debt on behalf of the borrower.
In exchange for stabilizing the protocol, liquidators claim a corresponding amount of the borrower’s collateral plus a liquidation bonus (typically 5% to 10% depending on the asset).
The True Cost of Liquidation to Borrowers
Liquidation does not wipe out your entire portfolio, but it inflicts a permanent financial loss due to the liquidation penalty.
Because liquidators seize collateral at a discounted rate, your remaining collateral balance is reduced significantly beyond the value of the repaid debt.
How to Intervene Before Reaching Health Factor 1.0
The moment your Health Factor drops below safe operational limits (e.g., 1.3), immediate action is required. You can boost your Health Factor by adding collateral, paying down debt, or executing an atomic collateral swap to a less volatile asset.
Frequently Asked Questions
Q1.Is liquidation automatic when HF reaches 1.0?
Yes. Third-party liquidation bots continuously monitor the blockchain and trigger liquidation transactions within seconds of HF dropping below 1.0.
Q2.Does Aave liquidate 100% of my position at once?
No. Aave protocols enforce a Close Factor (usually 50%), liquidating up to half of the debt in a single liquidation transaction.
Q3.Can I reverse a liquidation after it occurs?
No. Blockchain transactions are final and immutable. Liquidation losses cannot be reverted.
Protect Your Positions Against Liquidation
Monitor Health Factors and trigger automated rebalancing before liquidator bots step in.