# Borrow

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Borrowing in Mutuum revolves around the principle of overcollateralization. Users lock a certain amount of collateral—through either the P2C or P2P model—and receive the ability to borrow a proportionate value of assets. In the P2C setting, loans come directly from communal pools governed by real-time utilization rates, while the P2P framework matches borrowers and lenders for riskier tokens under custom terms. Regardless of the mode, borrowers retain ownership of their collateral unless their Stability Factor drops below safe thresholds, at which point liquidation mechanisms may step in. This approach offers flexibility: individuals can tap into liquidity without parting with potentially appreciating assets, and the protocol secures itself via automated checks, liquidation incentives, and overcollateralized buffers.

Interest rates within Mutuum adapt to supply-demand dynamics. In the P2C pools, a higher utilization raises borrowing costs and thus bolsters depositor yields. By contrast, users opting for P2P loans negotiate rates directly with counterparties, possibly securing more favorable or specialized terms, yet bearing higher market risk. Whether a borrower chooses stable or variable rates, they can repay any or all of their debt at any point, as long as there is sufficient liquidity. Upon repayment, the user’s borrowed tokens are returned to the pool (or lender), the accrued interest flows into the protocol’s revenue mechanisms, and the borrower regains full access to their collateral—provided no liquidation event has occurred.


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