Crypto Info

How to Use Aave to Borrow Against Your Crypto?

Ever felt like your crypto is just sitting there, not doing much? Imagine if you could use it like a house—take out a loan without selling it.

Good news: You can. And it’s way easier than you might think.

Welcome to the world of Aave, one of the best crypto lending platforms for beginners. With Aave, you can borrow against your crypto while still keeping ownership of it.

Whether you’re a small business owner needing quick capital, a trader looking to stay long without selling, or a student experimenting with DeFi, this guide is for you.

Let’s break it all down, step by step.

What Is Aave?

Aave (pronounced “ah-veh”) is a decentralized finance (DeFi) protocol that lets you lend and borrow crypto without a middleman.

Why Aave?

You keep your crypto
No credit checks
Interest rates are transparent
You can earn passive income too (by lending)

According to DeFiLlama (2024), Aave has over $8 billion in total value locked (TVL). That means a lot of people trust it.

Key Terms to Know Before You Start

Here’s a quick cheat sheet so you’re not lost:

Term	What It Means
Collateral	The crypto you deposit to borrow
Loan-to-Value (LTV)	% of your deposit you can borrow
Health Factor	Safety score for your loan
Liquidation	What happens if your loan gets risky

Pro Tip: The higher your health factor, the safer your loan is.

Tools You Need to Use Aave

Don’t worry—you won’t need anything fancy. Just:

A crypto wallet like MetaMask
Some ETH or other accepted tokens
A stable internet connection
Aave’s web app: app.aave.com

Step-by-Step: How to Borrow Using Aave

Let’s walk through it, nice and easy.

Step 1: Set Up Your Wallet

Install MetaMask or a similar wallet.
Add Ethereum or other supported networks (like Polygon or Arbitrum).
Load it with some crypto (ETH, USDC, etc.)

Heads-up: You’ll need a small amount of ETH to pay gas fees.

Step 2: Visit Aave and Connect Wallet

Go to Aave’s web app
Click Connect Wallet > Choose your wallet (like MetaMask)
Approve the connection

Boom—you’re in.

Step 3: Choose the Right Network and Market

Select a network like Ethereum or Polygon (Polygon has lower fees)
Choose the Aave v3 market (the latest version)

Step 4: Deposit Collateral

Click Supply next to the crypto you want to deposit
Enter the amount
Approve the transaction in your wallet

This crypto is now your collateral.

Step 5: Borrow Against It

Click Borrow
Choose a token (like USDC or DAI)
Select stable or variable interest rate
Enter the amount (stay below 75% of your collateral)
Approve the transaction

Congrats! You just borrowed using Aave.

Real-World Example: Sarah the Shop Owner

Sarah owns an online T-shirt store. She has $3,000 in ETH but doesn’t want to sell it.

Here’s what she does:

Deposits $3,000 in ETH as collateral on Aave
Borrows $1,500 in USDC
Buys inventory for her shop
Pays back the loan later while keeping her ETH intact

This is a great way to get cash without giving up on crypto gains.

Understanding Risk: Health Factor & Liquidation

Let’s break it down with a food analogy.

Think of your health factor like the freshness of milk in your fridge.

Above 1.5 = Fresh and safe
Below 1.0 = Sour! (Liquidation risk)

If your health factor drops below 1:

Aave can sell your collateral to repay the loan
You lose part of your deposit (plus a fee)

How to avoid it?

Don’t borrow too close to your limit
Monitor your health factor weekly
Set alerts using tools like DeBank or Zapper

Pros and Cons of Borrowing with Aave

Pros	Cons
No credit checks	Risk of liquidation
Use crypto without selling it	Requires active monitoring
Transparent fees	Gas fees can be high on Ethereum
Borrow stablecoins instantly	Limited to accepted assets/networks