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DeFi Loan Cost Calculator

Estimate your total borrowing costs before taking a DeFi loan. See monthly payments, total interest, and understand when borrowing makes sense.

Loan Cost Calculator

Estimate your total borrowing costs in DeFi lending protocols

Current Borrow APY: 5.80%

$
Total Cost of Borrowing
$580.00
Principal:$10,000.00
Total Interest:+$580.00
Total Repayment:$10,580.00
Monthly Payment
$48.33
Borrow APY
5.80%

Interest Breakdown

Daily Interest:~$1.61
Weekly Interest:~$12.08
Monthly Interest (avg):~$48.33

Break-Even Analysis

To profit from this loan, your investment must return more than:

5.80% over 12 months

Annualized: ~5.80% APY

Payment Schedule (First 6 Months)

MonthPaymentInterestBalance
1$48.33$48.33$10,000.00
2$48.33$48.33$10,000.00
3$48.33$48.33$10,000.00
4$48.33$48.33$10,000.00
5$48.33$48.33$10,000.00
6$48.33$48.33$10,000.00

... and 6 more months

Important: In DeFi, borrow rates are variable and can change at any time based on utilization. This calculator shows estimates based on current rates. Monitor your position regularly and maintain a healthy health factor to avoid liquidation.

Understanding DeFi Borrowing Costs

Before borrowing in DeFi, it's crucial to understand the true cost. Unlike traditional loans with fixed rates, DeFi borrow rates are variable and compound continuously. This means your costs can change over time, and interest is calculated every second.

Interest Cost

The primary cost - charged as a percentage (APY) of your borrowed amount, compounding continuously.

Gas Fees

Transaction costs for borrowing, repaying, and managing your position. Higher on Ethereum mainnet.

Opportunity Cost

Your collateral could be earning yield elsewhere. Factor in what you're giving up.

When Does DeFi Borrowing Make Sense?

Good Reasons to Borrow

  • •Leverage with clear edge: You have a high-conviction investment opportunity with expected returns significantly above borrow costs.
  • •Tax efficiency: Borrowing against crypto instead of selling avoids triggering taxable events (consult a tax professional).
  • •Short-term liquidity: Need cash temporarily without selling long-term holdings.
  • •Yield farming: Borrowing stables to farm when yield significantly exceeds borrow APY.

Risky Reasons to Borrow

  • •FOMO leverage: Borrowing to buy more of an asset that's already pumped.
  • •Unclear repayment plan: No strategy for how you'll repay the loan.
  • •Gambling: Using leverage on speculative meme coins or high-risk plays.
  • •Recursive leverage: Borrowing, supplying, borrowing more - extremely risky.

Typical DeFi Borrow Rates

Borrow rates vary by asset and market conditions. Generally, more popular assets have higher rates due to demand:

Asset TypeTypical Borrow APYWhy?
StablecoinsUSDC, USDT, DAI4-8%High demand for leverage, yield farming
ETHEthereum2-4%Moderate demand, used for shorting
WBTCWrapped Bitcoin0.3-1%Lower demand, mostly for shorting
LSDswstETH, rETH0.5-2%Low demand, niche use cases

Pro tip: Borrow rates spike during high market volatility. Consider waiting for calmer markets if you're not in a rush, or use rate limits available on some protocols.

Real Cost Example: Borrowing $10,000

Let's compare the total cost of borrowing $10,000 USDC at 5.5% APY across different time periods:

1 Month
$45.83
in interest
$10,045.83
total repayment
3 Months
$137.50
in interest
$10,137.50
total repayment
6 Months
$275.00
in interest
$10,275.00
total repayment
12 Months
$550.00
in interest
$10,550.00
total repayment

* Calculated with interest-only payments, rates are variable and may differ

Frequently Asked Questions

How does DeFi borrowing work?
In DeFi lending protocols like Aave, you deposit collateral (crypto assets) and can borrow other assets against it. Interest accrues continuously on your borrowed amount. Unlike traditional loans, there's no fixed repayment schedule - you can repay whenever you want, but you must maintain a healthy collateral ratio to avoid liquidation.
What affects my borrowing costs in DeFi?
Several factors affect your costs: 1) The borrow APY (interest rate), which varies by asset and market conditions, 2) The amount borrowed, 3) How long you keep the loan open, and 4) The repayment strategy you choose. Stablecoins typically have higher borrow rates (3-8%) than volatile assets like ETH (1-3%).
What is the difference between the repayment strategies?
Interest-only means you pay just the interest regularly and repay principal at the end - common in DeFi. Amortized means equal payments that reduce both principal and interest over time - typical for traditional loans. Bullet means no payments until the end when you pay everything - results in higher total costs due to compound interest.
Why do borrow rates change in DeFi?
DeFi protocols use algorithmic interest rates based on supply and demand. When many people borrow an asset (high utilization), rates increase to encourage more deposits. When borrowing demand is low, rates decrease to attract borrowers. This creates efficient, market-driven pricing.
What is the break-even analysis?
The break-even analysis shows the minimum return your investment must generate to cover your borrowing costs. For example, if you borrow at 5% APY to invest, you need to earn more than 5% to profit. This helps you evaluate whether leveraged strategies make sense.
Can I repay my DeFi loan early?
Yes! Unlike traditional loans, DeFi loans have no prepayment penalties. You can repay all or part of your loan at any time. You only pay interest for the time the loan was open. This flexibility is one of the advantages of DeFi lending.

Ready to Practice DeFi Borrowing?

Use our full Aave Simulator to practice borrowing and lending with real market data. See how health factors work and learn to manage positions safely.

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