# Borrowing Rates and Redemptions

When opening a Trove in Liquity V2 (minimum debt requirement of 2,000 BOLD), borrowers set their desired annual rate that can be adjusted at any time, or they can delegate rate management to third parties (managers). This market-driven and flexible approach gives the borrowers full control over their borrowing costs and redemption risk.

Borrowers willing to take on higher redemption risk may set lower rates for greater capital efficiency, while risk-averse users can opt for higher rates to minimize exposure to redemptions.

Borrowers with lower rates face higher redemption priority.

User-set rates also serve as a stabilizing mechanism for BOLD:

* When BOLD trades above $1, borrowers reduce rates due to lower redemption risk, making borrowing more attractive and stabilizing the peg
* When BOLD trades below $1, borrowers increase rates to mitigate redemption risk, boosting demand for BOLD and increasing yields for Stability Pool depositors

In cases of redemptions, those can be either:

* Partial Redemptions:\
  If a borrower’s debt is greater than the amount being redeemed, only a portion of their collateral is taken, and their debt is reduced accordingly.
* Full Redemptions:\
  If the redeemed amount exceeds a borrower’s debt, their entire debt is cleared, and any remaining collateral is left in their Trove. The borrower can choose to close their Trove or add new debt to meet the minimum debt requirement.

{% hint style="warning" %}
*Additionally, the system requires a 7-day interest fee paid upfront and a deposit of 0.0375 ETH as a refundable gas deposit in case of position liquidation (refunded to the wallet upon closing a Trove).*
{% endhint %}

***

## Related Articles:

* [Liquity V2](https://help.defisaver.com/protocols/liquity-v2)
* [Minimum Collateral Ratio (MCR)](https://help.defisaver.com/protocols/liquity-v2/minimum-collateral-ratio-mcr)


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