Collateral Factor

The fraction of a collateral asset's value that a lending protocol allows to be borrowed against. A 75 percent collateral factor on ETH means depositing $1,000 of ETH lets you borrow up to $750 of stablecoin. Lower factors are applied to more volatile or less-liquid assets. When the borrowed-to-collateral ratio crosses the collateral factor due to price movement, the position becomes eligible for liquidation. Protocols may use slightly different terminology — Aave calls this the 'Loan-to-Value' (LTV) ratio, Compound the 'collateral factor' — but the mechanism is the same.