How Much Does Aave Liquidation Cost?
Detailed breakdown of Aave liquidation costs including the liquidation penalty, bonus for liquidators, and how Guardian's 2.5% fee compares.
The Standard Liquidation Penalty
When your Aave position is liquidated, you pay a penalty in the form of a liquidation bonus that goes to the liquidator. On Aave v3 Polygon, this bonus is typically 5-10% of the liquidated amount. This means if $10,000 of your collateral is seized, you lose an additional $500-$1,000 worth of value.
How the Penalty Works
The liquidation bonus is built into the liquidation mechanism. A liquidator repays your debt and receives your collateral at a discount. For example, if they repay $5,000 of your debt, they might receive $5,500 worth of your collateral — the $500 difference is your penalty.
Guardian Rescue vs Liquidation
Guardian Rescue charges a flat 2.5% fee cap (250 bps) only if the rescue executes successfully. Compare this to the 5-10% liquidation penalty, and the savings are clear. For a $10,000 debt position, liquidation could cost $500-$1,000 while Guardian charges at most $250.
Additional Costs to Consider
Beyond the direct penalty, liquidation can trigger taxable events, affect your portfolio strategy, and force you to re-enter positions at unfavorable prices. Guardian Rescue helps you deleverage on your own terms.