What happens if I can't repay my loan on Aave?

If a user is unable to repay a loan on Aave, the system has mechanisms in place to manage this situation. Aave is a decentralized lending protocol where users borrow assets by providing collateral. If the value of the collateral falls below a certain threshold relative to the borrowed amount, a liquidation process may be triggered. Liquidation occurs when the collateral deposited is no longer sufficient to cover the outstanding loan due to changes in market conditions or asset prices. In the event of liquidation, a portion of the collateral is sold to cover the debt. This process is automatic and helps protect the overall health of the protocol, ensuring that lenders are safeguarded against defaults. It is important for borrowers to monitor their collateralization ratios and market conditions to avoid liquidation. Users can also consider managing their positions actively by either repaying parts of the loan or adding additional collateral to maintain a healthier loan-to-value ratio. For more specific inquiries regarding Aave's policies or tools, it is advisable to consult the official Aave website, where one can find relevant contact information and resources.