> For the complete documentation index, see [llms.txt](https://docs.polarity.finance/intro/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.polarity.finance/intro/defi-products/lending-and-borrowing/lending-calculation.md). # Lending Calculation When supplying or borrowing assets, users change the utilization ratio of the pool leading to a change in interest rates. The major consequence is that all loans have a variable rate that will change dynamically during the life of the loan. ### **Interest Rate Calculations** Interest rates are calculated continuously and interest are compounded based on the current parameters of the protocol. ### **Fees** * Reserve Factor allocates a portion of the borrow interest to the protocol, while the remaining portion is distributed to the lenders. * Loan Origination Fee is charged when funds are borrowed. * Liquidation Fee is charged when a liquidation occurs. The specific Reserve Factor, Loan Origination Fee and Liquidation Fee will be set by the protocol’s decentralized governance and adjusted over time. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter: ``` GET https://docs.polarity.finance/intro/defi-products/lending-and-borrowing/lending-calculation.md?ask=&goal= ``` `ask` is the immediate question: it should be specific, self-contained, and written in natural language. `goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.