Fixed Rate Lending
Overview
Fixed rate lenders on Notional deposit their assets to earn guaranteed yield until maturity.
The fixed rate is determined by supply and demand. Fixed rate borrowing pushes rates up and fixed rate lending pushes rates down.
Fixed rate lenders can withdraw before maturity subject to market liquidity.
Creating a position
To lend your assets at a fixed rate, follow these steps:
Go to the fixed rate lending page.
Pick a network.
Pick the asset you want to lend.
Input the amount you want to lend and select your maturity.
Click Continue to Review.
Click Submit.
Viewing your position
To find your position, go to the holdings tab on the portfolio page.
This page shows you detailed info about your position. You can see:
Your APY.
How much you deposited.
The current value of your position.
Your earnings.
Market APY vs. APY at Maturity
The UI shows two APYs for a fixed rate loan - a Market APY and an APY at Maturity.
Market APY: The current fixed APY offered at this maturity.
APY at Maturity: The fixed rate you got when you entered into the position.
Changes to the Market APY do not affect the APY at Maturity. If you hold the position to maturity you will get the APY at Maturity no matter what happens to the Market APY before maturity.
The Market APY matters if you want to exit your loan before maturity. Changes to the Market APY before maturity will cause your total earnings to fluctuate and change the amount that you can withdraw.
Managing your position
To manage your position, follow these steps:
Go to the portfolio holdings tab.
Expand the row of the asset you want to manage.
Click the manage button.
This gives you three options. You can:
Convert your loan into a fixed rate at a different maturity.
Convert your loan into a variable rate.
Convert your loan into providing liquidity.
Converting to a different fixed rate
To convert your fixed rate loan to a different fixed rate:
Decide on the new maturity and new fixed rate.
Click submit.
Review details and submit the transaction.
When you convert your fixed rate loan to a different fixed rate, you will pay a fee to exit your current loan early + a fee to enter into a new fixed rate loan position.
Converting to liquidity
To convert your fixed rate loan into providing liquidity follow these steps:
Select the liquidity option on the manage menu.
Click submit.
Review details and click submit again.
When you convert your fixed rate loan to providing liquidity, you will see a fee for exiting your fixed rate position early. You may also see a fee or rebate for providing liquidity. Both fees will show up on the trade summary.
Converting to a variable rate
To convert your fixed rate loan into variable rate lending, follow these steps:
Select the variable lend option on the manage menu.
Click submit.
Review details and click submit again.
When you convert your fixed rate loan to variable rate lending, you will see a fee for exiting your fixed rate position early.
Withdrawing your assets
To withdraw your assets, follow these steps:
Go to the portfolio holdings tab.
Expand the row of the asset you want to withdraw.
Click the withdraw button.
Enter the amount you want to withdraw.
Click submit.
Review details and click submit again.
Fees
Lending at a fixed rate includes a fee when you enter the position and when you exit before maturity. If you exit after maturity, there is no fee for withdrawing your assets.
The fee for lending fixed is 8% of the total interest you will earn until maturity, paid upfront.
This means that fees are higher when interest rates are higher and when you are lending for longer periods of time. Fees go to zero as you get closer to maturity.
Example entry fee calculation
User wants to lend 100,000 USDC at a fixed rate of 10% for 6 months.
Total guaranteed interest = 100,000 USDC * 10% / 2 = 5,000 USDC.
Entry fee = 5,000 USDC * 0.08 = 400 USDC.
Early exit
If you want to exit your loan early, you will need to pay another fee. This fee will be 8% of the remaining interest at the current market APY, not at the rate you locked in when you entered.
Example exit fee calculation
User lent 100,000 USDC at a fixed rate of 10% for 6 months.
User waits 3 months and then wants to exit. The current market rate is still 10%.
Total remaining interest = 100,000 USDC * 10% / 4 = 2,500 USDC.
Exit fee = 2,500 USDC * 0.08 = 200 USDC.
Slippage
When you lend at a fixed rate, you are using Notional's fixed rate liquidity provided by Notional liquidity providers.
This means that the amount you want to lend changes the fixed rate you get. When you lend more, the rate you get will be lower. This is similar to buying a token - the more you want to buy, the higher the price you pay.
Last updated
