Encyclopedia DeFi · Entry 352
Turning collateral on or off: supply balance is not borrowing power
In this article
At a glance
Key facts
| Fact | Detail | Source |
|---|---|---|
| Separate status | Supply balance and collateral eligibility are distinct. | [1] |
| Borrowing power | LTV and liquidation threshold govern different constraints. | [1] |
| Validation | The Pool validates a collateral-status change. | [2] |
Recalculate the backing that remains
Imagine eligible collateral A has value 1,000 and B has value 500, both with a hypothetical 80% liquidation threshold. Against debt of 900, health factor is 1,200 / 900 ≈ 1.33. If B stops counting, it would become 800 / 900 ≈ 0.89.
That desired state is below one. Disabling B is therefore not a harmless display preference in this example.
Do not confuse off with out
Switching collateral status concerns backing for debt. It leaves the supplied asset in the protocol unless a separate withdrawal occurs. Conversely, an asset visible in supplies might not be eligible collateral in the active category or configuration.
Read the post-action state before confirmation
Inspect debt, eligible assets and category-specific parameters after the proposed change. Repayment can reduce the need for backing, while a category change can alter which supplied assets count. The dashboard’s proposed health factor is a useful calculation to verify, not a guarantee against subsequent price changes.
Direct answers
Questions people ask
Will turning collateral off cancel my outstanding borrowing?
No. Debt persists until repayment or another protocol debt-resolution action.
Inspect the evidence
The answer and key facts have stable claim links. These records retain the scope and qualification when reused.
A collateral toggle changes whether a supplied asset counts toward borrowing capacity. It does not itself withdraw the asset or repay debt. In Aave V3, disabling collateral is subject to the remaining position’s health constraints, so an asset supporting an outstanding loan cannot always be switched off immediately.
Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.
Link to this claimSeparate status: Supply balance and collateral eligibility are distinct.
Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.
Link to this claimBorrowing power: LTV and liquidation threshold govern different constraints.
Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.
Link to this claimValidation: The Pool validates a collateral-status change.
Scope: DeFi · data through 2026-10-02. Verification: verified · 2026-10-02T19:18:00.092Z.
Link to this claimRevision history
- — First publication after primary-source research and separate automated verification.
On the Read a lending position path · Learn next: Does supplied collateral earn interest? Read the market accounting
Source register
Sources and references
Retrieval dates and locators are recorded individually.- Toggle Collateral StatusAave
Changing collateral status independently of supply balance.
Locator: Enable; Disable; health factor · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.565ZOpen source - Aave v3 PoolAave
Specific v3 write-method constraints and amount sentinel.
Locator: repay; setUserUseReserveAsCollateral; withdraw; setUserEMode · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.762ZOpen source - Health Factor and LiquidationsAave
Weighted liquidation thresholds; no universal safe ratio.
Locator: Health Factor; Managing Health Factor · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.960ZOpen source - Efficiency ModeAave
Higher capital efficiency under category assumptions.
Locator: Categories; correlated assets; risks · Version / scope: Documentation retrieved for the 2026-10-02 editorial scope; content hash recorded · Retrieved: 2026-10-02T18:53:21.760ZOpen source
Research and drafting use AI assistance. A separate automated review checks claims against primary sources; no external expert or named human review is implied. Publication, substantive editing, source retrieval and verification are recorded separately. This version was independently checked by an automated reviewer on 2 October 2026.
Editorial method and correctionsDegrees of Satoshi editorial project. “Turning collateral on or off: supply balance is not borrowing power.” Published 2026-10-02; updated 2026-10-02. https://degreesofsatoshi.com/encyclopedia/toggle-lending-collateral/