> For the complete documentation index, see [llms.txt](https://ark-defai.gitbook.io/ark/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://ark-defai.gitbook.io/ark/4.-layer-1-or-economic-laws-of-ark-defai/4.4-ark-loan-module-or-ark-lending-collateralized-lending-system/iii.-lending-process-collateral-lifecycle.md).

# III. Lending Process (Collateral Lifecycle)

1\. Stake → Borrow

* Users stake ARK to borrow corresponding assets
* No market valuation or external Oracle required

#### 2. Repayment → Unlock

* Pay off principal and interest to retrieve all ARK
* System applies payments to accumulated interest first, then to principal

#### 3. Renewal Mechanism

* Users can renew their loans up to 3 times within the term
* Each extension period (e.g., 180 days) increases the interest rate by 0.5%

#### 4. Liquidation Mechanism

* Liquidation triggers when collateral value falls below:

Total debt × Liquidation ratio (default is 110%)

→ This initiates the auction phase

Liquidations may offer discounted bidding (e.g., 8% discount)

If auction fails → ARK assets are recovered into the treasury