Allowing your debt position to fall below the minimum Adequacy Ratio will result in part of your collateral being liquidated with a discount, which will help lenders against financial loss.
Borrowers need to lock up supported assets in a smart contract as collateral to support your crypto loan. If the loan failed to satisfy the Adequacy Ratio and there was no top-of of collateral or timely repayment, part of your collateralized asset will be auctioned to repay your loan.
How much is the liquidation penalty?
7% for all assets supported on dForce Lending
20% for dForce synthetic stocks