# Health Factor

The **health factor** is a critical metric within the Godex Protocol that measures the safety of a borrow position. It is calculated as:<br>

**Health Factor = (Total Collateral Value \* Weighted Average Liquidation Threshold) / Total Borrow Value**<br>

The health factor determines a borrow position’s stability. A <mark style="color:red;">**health factor below 1**</mark> indicates a risk of **liquidation**. The **liquidation** **threshold**, set by **Godex Governance** for each asset, defines the maximum percentage of value that can be borrowed against that asset. For example, if a user supplies **$10,000** in **ETH** with an **80%** liquidation threshold and borrows **$6,000 in G-tokens**, the health factor would be **1.333**.

A health factor <mark style="color:red;">**above 1**</mark> means the position is **above the** **liquidation threshold**. Since the health factor fluctuates based on collateral and borrowed asset values, **regular monitoring** is essential. Users can **increase** their health factor by **adding more collateral** or **repaying part of their borrow position**. The health factor is directly tied to collateral value—if the value rises, the health factor **improves**; if it **falls**, the health factor **declines**, increasing liquidation risk.

However, there is no universal “safe” health factor. It depends on the volatility and correlation of the assets. Lower health factors may be acceptable for correlated assets, such as stablecoins or assets closely linked to ETH.

Liquidation occurs when a borrower’s health factor <mark style="color:red;">**drops below 1**</mark>, meaning their **collateral is insufficient** to cover the borrowed amount. This can happen due to **collateral value decreasing** or **an increase in the borrowed amount.** When liquidation occurs, up to **50% of the borrower’s** **debt** is repaid by a **liquidator**, and a liquidation **fee** is applied to the borrower’s collateral.

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Liquidations on Godex are **permissionless**, meaning **any network participant** can initiate the liquidation of an eligible borrow position. **Liquidators** operate in a highly competitive environment, closely monitoring borrow positions, reacting swiftly to market changes, and prioritizing liquidation transactions to be the first to execute.

### Tools for Managing Health Factor

* Simulate health factor changes: [DeFi Simulator](https://defisim.xyz/)
* Auto-repay borrow position: [DeFi Saver](https://defisaver.com/)