Ethefi: Borrow mode versus Direct Pay

Direct Pay draws on stablecoins available for spending, without creating a loan for that purchase.

With the Borrow feature enabled, eligible account assets are automatically supplied to a dedicated onchain lending market managed by EtherFi. These assets earn variable yield and act as collateral. Card purchases in Borrow mode borrow against that collateral, keeping the underlying holdings in place while adding debt.

The Borrow feature also allows users to request loans in assets such as USDC or ETH directly. Card spending is one use of the account's borrowing capacity.

Borrowing power depends on the eligible asset mix, each asset's loan-to-value (LTV) limit, existing debt, available liquidity and account limits. A purchase in Borrow mode will not be approved if it would push the position past its borrowing limit.

For the Aave LendGateway lending market on Optimism, Product LTV is the app-enforced cap used to calculate borrowing power. The market collateral factor and liquidation threshold are separate parameters. Legacy Cash DebtManager liquidation percentages describe a different system.

The Borrow feature has a $10 000 borrowing cap for users who have not completed identity verification. Verification removes that specific cap; collateral requirements, liquidity constraints and other account limits still apply. Card access separately depends on regional eligibility and the checks required during sign-up.

While a loan is outstanding, some assets may be reserved to maintain the required Health Factor. The amount available for spending or withdrawal can therefore be lower than the total account balance.

Interest accrues on the outstanding borrowed amount for as long as it remains unpaid. The Borrow feature has no fixed repayment schedule, and users can repay part or all of a loan at any time. Collateral continues earning variable lending yield while backing the loan.

Debt growth or falling collateral prices can increase LTV. Reaching the applicable liquidation threshold can trigger automatic liquidation of collateral. The app displays the current LTV, liquidation level and Health Factor; repaying debt or adding collateral can reduce risk. The limit on new purchases does not prevent later market movements from weakening an existing position.

Borrow can be turned off in settings when no borrowed amount remains outstanding. Assets then stop serving as Borrow collateral, and the card continues working in Direct Pay.

Opting out of the dedicated lending market stops interest earnings from that market and removes portfolio borrowing and card spending in Borrow mode. Other account functions remain available.