# Liquidation Model

In the event where, on a specific Collateral Account, the Collateral Factor reaches the Liquidation Threshold, a liquidation process takes place in order to protect lending pools from losses. The basic idea is to sell a portion of the collateral so that the proceeds can cover the loan repayment plus a reward for the Liquidator.

We consider the following example where 2 loans in Token A and Token B are collateralized by LP Tokens A/B. 

* If the value of the Collateral is higher than the value of the loans plus the Liquidation Reward, **Securd** determines the amount of collateral to deliver to the Liquidator against repaying both loans. The remaining collateral is left in the Borrower's Collateral Account.
* If the value of the Collateral is lower than the value of the loans plus the Liquidation Reward, **Securd** will determine the amount of the loans to be repaid against delivering the entire collateral to the Liquidator. The resulting loss will be supported by both Lending Pool equally.