# Overcollateralized Loan Overcollateralized Loans are a foundational concept in DeFi, enabling users to borrow assets by locking *up more value in collateral than the amount borrowed*. Unlike uncollateralized loans, where creditworthiness is assessed off-chain, overcollateralized loans rely entirely on collateral to secure the loan and protect lenders. In the Arkis ecosystem, overcollateralized loans are used as a secure way for [Asset Managers](/home/concepts/asset-manager.md) to access working capital while maintaining ownership and control over their yield-generating strategies. * Access liquidity without selling long-term positions * Earn yield on deposited collateral while borrowing * Real-time risk monitoring & automated liquidations * Full on-chain transparency and control * Seamless capital access through withdrawals to external wallets ### How it Works Asset Managers can deposit [collateral](/home/concepts/collateral-asset.md) into a Margin Account—such as: * Pendle PT or YT tokens * Curve LP tokens * Liquid staking derivatives (e.g., stETH, rETH) * Other yield-bearing or liquid ERC-20 assets Once the collateral is deposited, the [Arkis Margin Engine](/home/concepts/margin-engine.md) evaluates the **real-time value and risk** of the portfolio using stress-tested metrics and predefined LTVs for each asset. If the loan request is within the allowed limits, the Asset Manager can borrow stablecoins (e.g., USDC) or other approved tokens from the [Liquidity Poo](/home/concepts/market.md)l. The borrowed funds can be: * Used onchain in whitelisted protocols (e.g., trading, hedging, farming), **or** * Withdrawn to an external wallet All operations are governed by the rules of the specific Liquidity Pool and the Margin Account’s agreement. #### Example: An Asset Manager wants to extract liquidity from a Pendle LP token that is yield-generating and highly liquid: 1. They deposit $1,000 worth of Pendle PT tokens into their [Arkis Margin Account](/home/concepts/margin-account.md). 2. Arkis has set the LTV for Pendle PT tokens at 60%. 3. Based on this, the Asset Manager is eligible to borrow $600 in USDC. 4. They choose to withdraw $600 USDC to an external wallet to fund a strategy on a CEX or use it in an OTC deal. 5. Meanwhile, the Pendle LP continues to accrue yield within the Margin Account, reducing effective borrowing cost. If the value of the collateral drops below the safe threshold, the [Arkis Margin Engine](/home/concepts/margin-engine.md) will issue a margin call or initiate Liquidation to maintain the system’s integrity and protect lenders. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.arkis.xyz/home/concepts/overcollateralized-loan.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.