# Simulating a borrow position

- Borrow APR is set by the interest rate model (IRM) as a function of utilization of the asset in question.
- When the utilization of an asset is below the optimal point (uopt), APR is
**Still,**meaning it remains unchanged over time.

Notice the example below. When ETH utilization in the rETH market is at 46% utilization, borrowers pay a

**still rate**of 3.77% APR. The rate doesn’t change over time (rate if still).ETH optimal utilization is set at 70% in the rETH market (and across the entire protocol, actually).

You can simulate a borrow position to see how much APR you are going to pay after you complete a borrow transaction.

For example, we simulate borrowing 90 ETH from the rETH market.

Notice the following:

- ETH utilization increases from 46% -> 69%.
- Given that 69% utilization is below the optimal point (70%), the projected 5.67% APR will
**not**increase over time (**still rate)**. - We recommend users only borrow up to the optimal utilization point so that the borrow APR doesn't increase over time.

Let's say you intend to borrow 100 ETH and you simulate the position. Notice the following:

- ETH utilization will increase from 46% (Still) -> 72% (Dynamic).
- New projected APR is 5.89%. The new rate is a dynamic rate and therefore will increase over time starting at 5.89%.
- When utilization goes above the optimal point, the IRM changes the rate from still to dynamic in order to restores the optimal utilization state. The dynamic rate increases slowly every block, encouraging new deposits or repays. While ETH has 70% optimal point, stablecoins have 80% optimal utilization, whereas volatile assets with higher risk profile have 50% optimal.
- Notice the UI tells you how much APR is going to be by the end of day 1 and 3. Rate continues to grow after that.

Some degens attempt to borrow too much, increasing utilization above “critical” point, which is defined at 90%. In this case, only 10% of liquidity will be left in the market, which is risky.

Example: we simulate borrowing 175 ETH from the rETH market.

Notice the following:

- Utilization goes above the critical point (90%).
- Dynamic interest rate model activates further multipliers.
- Floor projected APR goes up to 17% and will climb over time at a much faster rate.
- Above critical utilization, the market becomes at risk of illiquidity.

Last modified 1mo ago