> For the complete documentation index, see [llms.txt](https://docs.mutuum.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.mutuum.com/interest-rate-model/borrow-interest-rate-and-liquidity-management.md).
# Borrow Interest Rate and Liquidity Management
The borrow interest rate is derived from the utilization rate, which indicates how much capital is actively being borrowed compared to the total pool supply. This rate model helps Mutuum balance liquidity through incentives:
* **When capital is abundant**: Interest rates remain comparatively low, encouraging borrowers to take loans, thus putting idle assets to use.
* **When capital is scarce**: Interest rates escalate to motivate loan repayments (reducing outstanding debt) and attract additional deposits from potential lenders seeking higher yields.
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