Variable Borrow Rate

A Variable Borrow Rate is an interest rate that fluctuates in real-time based on the utilization of a lending pool. Unlike fixed rates, these rates change as supply and demand dynamics shift, providing a market-driven cost of borrowing.

While this offers flexibility, it also introduces uncertainty for borrowers who must manage their debt costs in a changing environment. These rates are calculated by the protocol's interest rate model to ensure that the pool remains balanced.

For traders using leverage, variable rates can significantly impact the cost of maintaining a position over time. Understanding the factors that drive these rate changes is crucial for effective debt management.

It is a fundamental feature of most open-source money markets.