> For the complete documentation index, see [llms.txt](https://nebula-18.gitbook.io/nebula/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://nebula-18.gitbook.io/nebula/tech-overview/nebula-technology-overview/risk-management-and-security/collateralization-requirements.md).

# Collateralization Requirements

#### **Over-Collateralization**

Borrowers must lock collateral worth more than the borrowed amount to protect the protocol against default.

* **Example:** If the collateralization ratio is 150%, a user borrowing $100 must lock $150 worth of collateral.

#### **Dynamic Collateralization**

The required ratio varies depending on the asset's volatility:

* **Stablecoins** may have lower collateralization ratios due to reduced volatility.
* **Volatile Assets** require higher collateralization ratios to mitigate risk.

#### **Borrower Evaluation**

The protocol assesses borrowers using:

* Historical data
* Credit scoring
* Behavior analysis

This ensures appropriate lending terms and collateral requirements.

#### **Risk-Based Parameters**

Lending parameters, such as loan-to-value (LTV) ratios and interest rates, are customized based on individual borrower risk profiles. This promotes responsible borrowing and reduces default risks.

***

<br>