Margin Call (Lending)
A notification to borrowers to add collateral or repay part of a loan to restore a safe LTV ratio.
What is Margin Call (Lending)?
In DeFi lending, a margin call alerts borrowers when collateral value nears the liquidation threshold, prompting them to deposit more assets or reduce debt. Unlike traditional finance, DeFi margin calls are automated via smart contracts or dashboards. For example, Aave notifies users if their health factor drops below 1.5, giving them time to act before liquidation.
In 2024, margin call systems prevented 20% of potential liquidations on MakerDAO by enabling proactive user actions, per Dune Analytics. As of 2025, protocols integrate cross-platform alerts, improving user experience and reducing losses during volatility.
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