How To Take Out And Repay A Loan on Abracadabra

DeFi loans are a great tool for long-term crypto investors that need a cash loan but don’t want to liquidate their crypto portfolio. With Abracadabra this process is not only simple, but it also gives users the freedom to take out stablecoin loans using interest-bearing assets such as yvDAI or yvWETH.

What this means is that you can stake Ethereum in Yearn Finance vaults, earn passive income on it, and still take out a loan using your staked tokens as collateral. Here is how you can do it in a few easy steps.

Step 1 – Acquire Collateral Tokens #

As mentioned above, Abracadabra will let you take out a loan using specific crypto assets as collateral so the first thing to do would be to obtain these tokens. Go to the borrow page and see if the tokens you already own can be used as collateral.

If your tokens are not on the list then you will need to acquire some that are. Either stake some ETH or DAI in Yearn Finance vaults or purchase other tokens like WETH on the market of your choice. Keep in mind that Abracadabra is available on six different blockchains so always make sure that you understand which chain you are interacting with.

Step 2 – Approve and Deposit #

The process is the same for every collateral token and every network so for this example let’s use wFTM on the Fantom network. On the borrow page select wFTM as collateral and select the borrow option. If you don’t have wFTM you can select the “use FTM” option and the protocol will convert the tokens in the process.

Abracadabra lets you borrow and deposit funds in the same transaction so you will know exactly how much MIM can be borrowed and how the borrowed amount affects the health of your position.

After specifying the borrow and deposit amounts click on “Add collateral and borrow”. This will prompt two transactions in your Metamask wallet. The first one allows Abracadabra to use your wFTM tokens and the other one executes the order. After the second transaction is confirmed, your collateral will be deposited into the protocol and the MIM tokens will be deposited into your wallet.

If you check the bottom right corner of the page you will get all of the required information regarding the liquidation threshold, borrow fees and everything else regarding your loan.

Step 3 – Repaying Your Loan #

Over time the borrowed MIM amount will increase depending on the interest fee. When you are ready to repay your loan simply hold enough MIM in your wallet to cover it completely, go to the same borrow page as last time and select the “Repay” option.

Here you will be able to repay your loan or even remove collateral in the same transaction. Just make sure that you specified both amounts correctly or if you want to remove everything and repay your loan completely select “max” for both MIM and your underlying collateral.

After everything is set click on “repay” or “remove collateral and repay” depending on what you want to do. Just like last time, there will be two transactions that need to be confirmed. The first one allows Abracadabra to access your MIM tokens and the second one executes the transaction.

Conclusion #

DeFi lending can seem like a very complicated process but the team behind Abracadabra had that in mind obviously. Thanks to the simple and very straightforward user interface even users that are new to crypto should easily find their way around and figure out how collateralized loans work on Abracadabra.