Lending Protocol APY Calculator

APY accounts for interest earning interest as it compounds throughout the year, while APR is the simple annualized rate before compounding. The more frequently interest compounds — daily versus weekly, for example — the more the effective APY exceeds the quoted APR for the same nominal rate, which is why this calculator asks for compounds per year as a separate input from the base rate.

Token rewards like COMP or AAVE incentives are typically distributed periodically and need to be manually claimed and, if you want them compounding, manually restaked — they don't automatically compound the way base interest often does within the protocol. This calculator treats reward APR as simple (non-compounding) interest for that reason, which is a more conservative and typically more realistic estimate than assuming automatic reinvestment.

It means your borrow-side token rewards exceed your borrow interest cost — some protocols during certain periods have paid enough in incentive tokens that borrowing was effectively profitable before even counting the yield on your supplied collateral. This isn't universal or permanent; it depends entirely on the specific protocol's reward emissions at the time.

Real lending protocols set liquidation thresholds per collateral asset — often lower for volatile assets to give the protocol more of a cushion, and higher for stable assets like major stablecoins. This calculator uses one flat threshold as a simplified, illustrative estimate; check your specific protocol's actual per-asset liquidation threshold before relying on the Health Factor for real risk management.

Yes, holding your borrow amount fixed — Loan-to-Value is borrow amount divided by deposit amount, so a larger deposit against the same borrow lowers LTV, which raises the Health Factor (since Health Factor here is calculated as the liquidation threshold divided by LTV). This is the same principle behind adding collateral to reduce liquidation risk on any over-collateralized lending position.