# Borrowing AuUSD
By the end of this guide, you'll understand how to create a vault, deposit collateral, borrow AuUSD, and manage your position safely.
***
## Before You Begin
#### Prerequisites Checklist
Before borrowing AuUSD for the first time, ensure you have:
**Account Setup:**
* [AuResources account created](https://auresources.gitbook.io/help-center/getting-started/creating-your-account)
* Signed in to the platform
* Wallet connected (or using email/SSO sign-in)
**Token Holdings:**
* PGF tokens (Future Gold Tokens) or AuSG tokens (Spot Gold Tokens)
* [Tokens in your connected wallet](https://auresources.gitbook.io/help-center/getting-started/purchasing-tokens)
* Sufficient quantity to make borrowing worthwhile
**Network Requirements:**
* Wallet connected to Polygon network
* Sufficient POL for gas fees (at least 0.5 POL recommended)
* POL needed for multiple transactions (vault creation, deposit, borrow, repay)
**General:**
* Understood [vault mechanics](https://auresources.gitbook.io/help-center/auresources-ecosystem/defi/vault) and liquidation risks
* Know how much you want to borrow
* Planned your repayment strategy
## Understanding the Vault
### What is a Vault?
A [vault is a smart contract](https://auresources.gitbook.io/help-center/auresources-ecosystem/defi/vault) that holds your tokens as collateral and tracks your borrowed AuUSD. Think of it as a personal borrowing account where:
* Your tokens are locked as collateral
* You borrow AuUSD based on collateral value
* Interest accrues at 0.1% annually
* You repay to unlock your collateral
### Key Concepts
#### **Loan-to-Value (LTV) Ratio**
The percentage of your collateral's value you can borrow. For example, with 70% LTV:
* Collateral worth $1,000
* Maximum borrow: $700 AuUSD
#### **Health Factor**
A measure of your vault's safety:
```
Health Factor = (Collateral Value) / (Debt + Interest)
```
* Above 1.2: Safe
* Between 1.0 and 1.2: Caution zone
* Below liquidation threshold: Can be liquidated
#### **Liquidation**
If your health factor drops too low, anyone can liquidate your vault:
* Your collateral is sold to repay the debt
* A penalty fee is applied
* You lose your collateral
* Always monitor your health factor
### Token Types and LTV Ratios
[**Future Gold Tokens**](https://auresources.gitbook.io/help-center/auresources-ecosystem/tokens/future-gold-tokens)
* Lower LTV because gold hasn't been mined yet
* Higher risk means you can borrow less
* Maturity date affects LTV (nearer = higher)
[**AuSG Tokens (Spot Gold Tokens)**](https://auresources.gitbook.io/help-center/auresources-ecosystem/tokens/ausg-spot-gold-token)
* Higher LTV because gold is refined and vaulted
* Lower risk means you can borrow more
* More stable collateral value
## Step-by-Step Borrowing Process
{% stepper %}
{% step %}
#### Access the Vault Section
1. Navigate to [**https://dapp.auresources.io/borrow**](https://dapp.auresources.io/borrow)
2. Connect your wallet if not already connected
{% endstep %}
{% step %}
#### Create Your Vault
1. Click "Open Your Vault"
2. Confirm the transaction in your wallet
3. Wait for confirmation (5-30 seconds)
{% endstep %}
{% step %}
#### Deposit Collateral
1. Click on the "Deposit" button next to the token you want to use as collateral
2. Enter the amount of tokens to deposit
3. Complete the two following transactions:
First Transaction: Token Approval
Before depositing tokens, you must approve the vault contract to access them.
**Approval Process:**
* A wallet popup appears
* Transaction type: "Approve \[Token]"
* This gives the vault permission to hold your tokens
* You're setting a spending limit
**Review:**
* Verify you're approving the correct token
* Check the spending limit
* Review gas fee (usually $0.01-0.05)
**Action:**
* Click "Confirm" in your wallet
* Wait for confirmation (5-30 seconds)
Second Transaction: Deposit Collateral
1. Review the deposit amount
2. Click "Deposit \[Token]"
3. Confirm the transaction in your wallet
4. Wait for confirmation (5-30 seconds)
5. Your collateral is now locked in the vault
{% endstep %}
{% step %}
#### Borrow AuUSD
1. In your vault dashboard, you'll see:
* Total collateral value
* Available to borrow
* Current debt (if any)
* Health factor
2. Click the "Borrow AuUSD" button
3. Enter the amount of AuUSD you want to borrow
4. Review the information:
* Borrow amount
* New health factor after borrowing
* Interest rate
* Liquidation price
5. Click "Borrow AuUSD"
6. Confirm the transaction in your wallet
7. Wait for confirmation (5-30 seconds)
8. AuUSD appears in your wallet
{% endstep %}
{% endstepper %}
## Managing Your Position
### Monitoring Your Vault
{% stepper %}
{% step %}
#### Access the Vault Section
1. Navigate to [**https://dapp.auresources.io/borrow**](https://dapp.auresources.io/borrow)
2. Connect your wallet if not already connected
{% endstep %}
{% step %}
#### Check key metrics
* Health factor
* Collateral value
* Debt amount
* Accrued interest
{% endstep %}
{% endstepper %}
{% hint style="warning" %}
Check your vault regularly, especially during volatile markets.
{% endhint %}
### Adding Collateral
{% stepper %}
{% step %}
#### Access the Vault Section
1. Navigate to [**https://dapp.auresources.io/borrow**](https://dapp.auresources.io/borrow)
2. Connect your wallet if not already connected
{% endstep %}
{% step %}
#### Deposit Collateral
1. Click on the "Deposit" button next to the token you want to use as collateral
2. Enter the amount of tokens to deposit
3. Complete the two following transactions:
First Transaction: Token Approval
Before depositing tokens, you must approve the vault contract to access them.
**Approval Process:**
* A wallet popup appears
* Transaction type: "Approve \[Token]"
* This gives the vault permission to hold your tokens
* You're setting a spending limit
**Review:**
* Verify you're approving the correct token
* Check the spending limit
* Review gas fee (usually $0.01-0.05)
**Action:**
* Click "Confirm" in your wallet
* Wait for confirmation (5-30 seconds)
Second Transaction: Deposit Collateral
1. Review the deposit amount
2. Click "Deposit \[Token]"
3. Confirm the transaction in your wallet
4. Wait for confirmation (5-30 seconds)
5. Your collateral is now locked in the vault
{% endstep %}
{% step %}
#### Health factor improves immediately
{% endstep %}
{% endstepper %}
### Repaying Debt
To unlock your collateral, repay your debt:
{% stepper %}
{% step %}
#### Access the Vault Section
* Navigate to [**https://dapp.auresources.io/borrow**](https://dapp.auresources.io/borrow)
* Connect your wallet if not already connected
{% endstep %}
{% step %}
#### Repay some or all of your debt
1. Click the "Repay Debt" button
2. Enter amount to repay
3. Complete the two following transactions
First Transaction: AuUSD Approval
Before repaying your debt, you must approve the vault contract to access your AuUSD.
**Approval Process:**
* A wallet popup appears
* Transaction type: "Approve AuUSD"
* This gives the vault permission to transfer your AuUSD
* You're setting a spending limit
**Review:**
* Verify you're approving the correct token
* Check the spending limit
* Review gas fee (usually $0.01-0.05)
**Action:**
* Click "Confirm" in your wallet
* Wait for confirmation (5-30 seconds)
Second Transaction: Debt Repayment
1. Review the repayment amount
2. Click "Repay Debt"
3. Confirm the transaction in your wallet
4. Wait for confirmation (5-30 seconds)
{% endstep %}
{% endstepper %}
### Withdrawing Collateral
After repaying debt (or if you have excess collateral):
{% stepper %}
{% step %}
#### Access the Vault Section
* Navigate to [**https://dapp.auresources.io/borrow**](https://dapp.auresources.io/borrow)
* Connect your wallet if not already connected
{% endstep %}
{% step %}
#### Click the "withdraw \[Token]" button
1. Click the 
(Triple dots) button next to the collateral you want to withdraw
2. Click the "Withdraw \[Token]" button
3. Enter amount to withdraw
4. Click the "Withdraw \[Token]" button
5. Confirm the transaction
6. Tokens return to your wallet
{% endstep %}
{% endstepper %}
## After Your Borrow
### What Happens Next
**Immediate:**
* AuUSD is in your wallet
* Collateral is locked in vault
* Interest begins accruing (0.1% annually)
* Health factor is calculated
**Ongoing:**
* Monitor your health factor regularly
* Gold price changes affect collateral value
* Interest accumulates over time
* Add collateral if health factor drops
**When You're Ready:**
* Repay debt to unlock collateral
* Withdraw collateral to your wallet
* Keep your vault for future use
### Important Reminders
**Interest Accrues Continuously:**
* 0.1% annual rate compounds per second
* Even small amounts grow over time
* Factor this into your repayment planning
**Gold Price Volatility:**
* Collateral value changes with gold spot price
* Sudden drops can trigger liquidation
* Always maintain a safety buffer
**Gas Fees:**
* Each action requires POL for gas
* Vault creation, deposits, borrows, repayments all cost gas
* Keep sufficient POL in your wallet
## Troubleshooting
### Common Issues
**"Insufficient Collateral" Error:**
* You're trying to borrow too much
* Reduce borrow amount
* Or add more collateral first
**Transaction Failing:**
* Check you have enough POL for gas
* Verify wallet is connected to Polygon network
* Try increasing gas price in wallet settings
* Wait for network congestion to clear
**Can't Withdraw Collateral:**
* Check you have sufficient collateral after withdrawal
* Health factor must remain above minimum
* Repay some debt to free up collateral
* Or reduce withdrawal amount
**Health Factor Dropping:**
* Gold price has decreased
* Add more collateral immediately
* Or repay some debt to improve health factor
* Act before reaching liquidation threshold
**Interest Accumulating Faster Than Expected:**
* Interest compounds continuously
* Small percentages add up over long periods
* Check exact debt amount before repaying
* Plan for slightly more than principal
### Understanding Liquidation
#### When Liquidation Occurs
Your vault can be liquidated when:
* Health factor drops below liquidation threshold
* Usually around 1.2 (varies by token type)
* Anyone can trigger the liquidation
* Liquidator receives a reward
#### Liquidation Process
1. Liquidator repays your debt
2. They receive your collateral
3. Liquidation penalty applied
4. Remaining collateral (if any) returns to you
5. Vault is cleared
#### Avoiding Liquidation
**Monitor Regularly:**
* Check health factor daily during volatile markets
* Set up price alerts for gold
* Use portfolio tracking tools
**Maintain Buffer:**
* Never borrow maximum amount
* Keep health factor above 1.5
* Add collateral proactively
**Quick Response:**
* Have POL ready for emergency transactions
* Know how to add collateral quickly
* Consider partial repayment if concerned
## Key Takeaways
{% hint style="info" %}
Borrowing AuUSD unlocks liquidity from your gold tokens without selling them. Create a vault, deposit tokens as collateral, and borrow AuUSD at 0.1% annual interest. The process requires multiple transactions: vault creation, token approval, collateral deposit, and finally borrowing.
Never borrow the maximum available amount. Maintain a healthy buffer above the liquidation threshold by keeping your health factor above 1.5. Gold price volatility can quickly change your position from safe to at-risk.
Monitor your vault regularly, especially during volatile markets. Add collateral or repay debt if your health factor drops. Keep sufficient POL in your wallet for emergency transactions. When ready, repay your debt plus accrued interest to unlock and withdraw your collateral.
{% endhint %}