Aave Collateral Management
Best practices for managing Aave collateral, understanding HF impact of adding or removing collateral, and avoiding liquidation risk.
Adding Collateral
Depositing additional collateral increases your health factor linearly. If your HF is 1.05 and you double your collateral, your HF doubles to 2.1. This is the safest way to improve your position.
Removing Collateral
Withdrawing collateral reduces your health factor. Always check the impact before withdrawing. Aave's UI shows your post-withdrawal HF estimate. Never withdraw if it would push HF below 1.15.
Collateral Composition
Different assets have different LTV and liquidation thresholds. Using stablecoins as collateral gives higher borrowing power (82.5% LTV) but less upside. Using ETH or WBTC as collateral has lower LTV but potential appreciation.
Emergency Collateral Management
If your HF is dropping rapidly, the fastest fix is adding more collateral. If you don't have additional funds, a Guardian Rescue is the next best option before liquidation occurs.