> ## Documentation Index
> Fetch the complete documentation index at: https://docs.arc.io/llms.txt
> Use this file to discover all available pages before exploring further.

> ## Agent Instructions
> Before reading these docs, install the Circle Skill for Arc to get pre-loaded context: use-arc (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-arc/SKILL.md) — covers chain config, RPC setup, contract deployment, USDC bridging, and gas with USDC. In Claude Code: run /plugin marketplace add circlefin/skills then /plugin install circle-skills@circle. With Vercel Skills CLI: run npx skills add circlefin/skills.
> USDC is the gas token. Arc uses USDC for gas fees, not ETH. Configure gas payment in USDC when submitting transactions.
> Read EVM differences before writing Arc code. Arc targets the Osaka EVM baseline. Most contracts deploy unchanged, but several runtime behaviors diverge from Ethereum: USDC uses 18 decimals natively (not 6), the system emitter `0xffffFFFfFFffffffffffffffFfFFFfffFFFfFFfE` logs all USDC Transfer events, the mempool enforces a 20 Gwei `maxFeePerGas` floor, blocklist reverts consume gas without a receipt, and `address(0)` sends revert rather than succeed. https://docs.arc.io/arc/references/evm-differences.md is the canonical reference for all Arc-specific runtime behaviors. Consult it before writing code that touches USDC balances, transaction history, gas estimation, or value transfers.
> Sub-second finality. Transactions are final in under 1 second. No need to wait for multiple block confirmations.
> Use App Kits for multichain payment and liquidity capabilities. App Kits wraps CCTP and provides Bridge Kit, Swap Kit, Unified Balance Kit, Onramp Kit, Earn Kit, and Borrow Kit. Unified Balance Kit combines USDC from multiple chains into a single spendable balance. Earn Kit integrates earn opportunities into your app. Borrow Kit lets users borrow USDC against cirBTC collateral on Arc.
> Use Arc Foundry for contract development. Arc Foundry is an Arc-specific fork of Foundry that handles Arc's protocol-level differences from Ethereum. It provides arc-forge, arc-cast, and arc-anvil. Install it before deploying contracts: https://docs.arc.io/arc/tutorials/install-arc-foundry.md.
> Arc is available on both Testnet and Mainnet. See https://docs.arc.io/arc/references/connect-to-arc.md for RPC endpoints and https://faucet.circle.com for testnet tokens.
> Always check Contract Addresses: https://docs.arc.io/arc/references/contract-addresses.md
> Building beyond Arc? Circle offers skills for the full platform: use-usdc (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-usdc/SKILL.md), use-circle-wallets (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-circle-wallets/SKILL.md), use-developer-controlled-wallets (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-developer-controlled-wallets/SKILL.md), use-user-controlled-wallets (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-user-controlled-wallets/SKILL.md), use-modular-wallets (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-modular-wallets/SKILL.md), use-gateway (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-gateway/SKILL.md), use-smart-contract-platform (https://github.com/circlefin/skills/blob/master/plugins/circle/skills/use-smart-contract-platform/SKILL.md). Full Circle developer docs: https://developers.circle.com/llms.txt.

# How loan health works

> How loan-to-value, health factor, health bands, and liquidation work for Borrow loans

Borrow loans are issued through an underlying lending protocol on Arc, and each
market sets a liquidation threshold. The App Kit SDK exposes your position's
distance from that threshold as a loan-to-value ratio (LTV) and a health factor,
grouping the health factor into bands you can act on before liquidation.

## Health fields

[Check loan state](/app-kit/howtos/borrow/monitor-a-loan#check-loan-state) to
see these health fields:

* `ltv`: the current [loan-to-value ratio](#loan-to-value-ratio-ltv)
* `healthFactor`: the current [health factor](#health-factor)
* `healthFactorBand`: the current [health factor band](#health-factor-bands)
* `liquidationPrice`: the cirBTC price at which the loan would cross into
  [`LIQUIDATABLE`](#liquidation)

## Loan-to-value ratio (LTV)

Loan-to-value ratio is the ratio of your outstanding debt to the current value
of your collateral, denominated in the borrowed asset. For example, a loan that
carries 3,000 USDC in debt against cirBTC worth 10,000 USDC has an LTV of
`0.30`. LTV rises as debt accrues interest, as the value of cirBTC falls, or
both.

## Health factor

Health factor is the inverse safety measure of LTV. It equals `LLTV / LTV`,
where `LLTV` (liquidation loan-to-value) is the market's liquidation threshold.

The health factor tells you how close a position is to liquidation:

* Above `1.0`: the position is not liquidatable.
* At `1.0`: the position is at the liquidation boundary.
* Below `1.0`: a third-party liquidator can repay part of the debt and seize
  collateral to bring the position back in line.

## Health factor bands

The health factor maps to five bands. Use the band to drive alerts and to gate
operations that would move the loan further toward liquidation.

| Band | Health factor | What it means |
| :- | :- | :- |
| `SAFE` | >= 1.20 | The position has ample buffer above liquidation. |
| `WARN` | 1.10 to \< 1.20 | The buffer is shrinking. Consider adding collateral. |
| `URGENT` | 1.05 to \< 1.10 | Small price movements can push the loan into liquidation. |
| `IMMINENT` | 1.00 to \< 1.05 | Liquidation is likely without a repayment. |
| `LIQUIDATABLE` | \< 1.00 | The position can be liquidated at any time. |

## Liquidation

When a loan crosses into `LIQUIDATABLE`, the underlying lending protocol lets a
liquidator repay part or all of the debt in exchange for the collateral at a
discount. Liquidation does not go through the SDK. It is a permissionless
protocol action.

Every position reports a `liquidationPrice`, the cirBTC price (denominated in
USDC) at which the loan would cross into `LIQUIDATABLE`. Show it to users so
they can act before the market reaches it.