# Turning collateral on or off: supply balance is not borrowing power

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.

Evidence: [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status); [Aave v3 Pool](https://aave.com/docs/aave-v3/smart-contracts/pool)

Canonical: https://degreesofsatoshi.com/encyclopedia/toggle-lending-collateral/
Published: 2026-10-02
Substantively modified: 2026-10-02
Independently verified by an automated reviewer: 2026-10-02T19:18:00.092Z
Data current through: 2026-10-02

AI-assisted research and drafting with a separate automated source-verification pass; no external expert or named human review is implied.

## Key facts

- **Separate status:** Supply balance and collateral eligibility are distinct. ([Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status))
- **Borrowing power:** LTV and liquidation threshold govern different constraints. ([Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status))
- **Validation:** The Pool validates a collateral-status change. ([Aave v3 Pool](https://aave.com/docs/aave-v3/smart-contracts/pool))

## 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.

Evidence: [Health Factor and Liquidations](https://aave.com/help/borrowing/liquidations); [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status)

## 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.

Evidence: [Aave v3 Pool](https://aave.com/docs/aave-v3/smart-contracts/pool); [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status)

## 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.

Evidence: [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status); [Efficiency Mode](https://aave.com/help/borrowing/e-mode)

## Questions

### Will turning collateral off cancel my outstanding borrowing?

No. Debt persists until repayment or another protocol debt-resolution action.

Evidence: [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status); [Aave v3 Pool](https://aave.com/docs/aave-v3/smart-contracts/pool)

## Claims and scope

### toggle-lending-collateral-quick-answer

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: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null}

### toggle-lending-collateral-fact-separate-status

Separate status: Supply balance and collateral eligibility are distinct.

Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null}

### toggle-lending-collateral-fact-borrowing-power

Borrowing power: LTV and liquidation threshold govern different constraints.

Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null}

### toggle-lending-collateral-fact-validation

Validation: The Pool validates a collateral-status change.

Scope: {"collection":"defi","dataAsOf":"2026-10-02","blockHeight":null}

## Sources

- [Toggle Collateral Status](https://aave.com/help/supplying/toggle-collateral-status) — Aave. Changing collateral status independently of supply balance. Locator: Enable; Disable; health factor. Retrieved: 2026-10-02T18:53:21.565Z.
- [Aave v3 Pool](https://aave.com/docs/aave-v3/smart-contracts/pool) — Aave. Specific v3 write-method constraints and amount sentinel. Locator: repay; setUserUseReserveAsCollateral; withdraw; setUserEMode. Retrieved: 2026-10-02T18:53:21.762Z.
- [Health Factor and Liquidations](https://aave.com/help/borrowing/liquidations) — Aave. Weighted liquidation thresholds; no universal safe ratio. Locator: Health Factor; Managing Health Factor. Retrieved: 2026-10-02T18:53:21.960Z.
- [Efficiency Mode](https://aave.com/help/borrowing/e-mode) — Aave. Higher capital efficiency under category assumptions. Locator: Categories; correlated assets; risks. Retrieved: 2026-10-02T18:53:21.760Z.

## Revision history

- 2026-10-02: First publication after primary-source research and separate automated verification.

## Cite this entry

Degrees 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/