> For the complete documentation index, see [llms.txt](https://support.backpack.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://support.backpack.exchange/exchange/borrow-and-lend/utilization-interest-rates-risks/risks.md).

# Risks

### **1. Main Risks for Lenders (Depositors)**

* **Liquidity Risk:** At times of high utilization, it may be difficult to withdraw funds immediately, as most liquidity is already borrowed.
* **Market Risk (Asset Depreciation):** Lenders deposit crypto assets; if the market value of these assets drops significantly, the real return (in fiat terms) may decrease despite earning interest.
* **Variable Interest Rates:** Lending yields are not fixed and may fluctuate based on borrowing demand. Lower demand results in lower returns.

***

### **2. Main Risks for Borrowers**

* **Liquidation Risk:** If the collateral value falls below the required maintenance margin, the borrower’s position may be liquidated, potentially at a loss.
* **High Interest Costs:** During periods of high utilization, borrowing rates may increase sharply, making loans more expensive.
* **Collateral Volatility:** Since most collateral is in volatile crypto assets, rapid price declines can quickly trigger margin calls and liquidations.
* **Over-Leverage Risk:** Borrowing against volatile assets may amplify losses if the market moves unfavorably.

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### **👉**[**Learn more about** Risks](/technical-docs/borrow-and-lend/risks.md)

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