📌 Introduction

Lending your crypto assets is one of the best ways to generate passive income in DeFi. With Rain.fi, you can lend your tokens or NFTs by creating custom liquidity pools, setting your own terms, and earning interest on borrowed funds.

Unlike traditional lending platforms, you have full control over the loan parameters, including the APR, loan duration, and Loan-to-Value (LTV) ratio. Since Rain.fi V2, you can even create multiple pools, each with different assets, allowing for diversified lending strategies.

“If you don’t find a way to make money while you sleep, you will work until you die.”
 — Warren Buffett

In this guide, we’ll cover:

✅ How lending works on Rain.fi
✅ Key parameters to consider when setting up a pool
✅ Strategies to maximize returns while managing risk
✅ The guide on how to create your pool step by step

Let’s dive in! 🚀

🤷‍♂️ Why Lend on Rain.fi? Key Features & Advantages

Rain.fi uses a decentralized peer-to-peer model where lenders define their own loan conditions instead of relying on a fixed system. Unlike conventional lending platforms that impose preset rules, Rain.fi gives full control to lenders, allowing them to set their own risk parameters and lending strategies.

📈 Earn passive income on your own terms

Instead of letting your assets sit idle, lending on Rain.fi allows you to generate high-yield returns by providing liquidity to borrowers. You have full control over who can borrow, at what rate, and under what conditions, ensuring your capital is used efficiently based on your risk appetite.

Lenders on Rain.fi can earn up to 200% APY, depending on loan terms, borrower demand, and market conditions. For example, the average lending rate for USDC sits around 120% APY!

🌍 Diversify with multiple pools and asset types

Since Rain.fi V2, you can create multiple pools with different assets through one account, each with customized lending conditions. This flexibility allows you to diversify risk while optimizing your earnings.

For example:

• Stablecoin-focused pools → Lower risk, steady returns.
• Crypto-backed pools → Higher potential earnings, more market exposure.
• NFT lending pools → Unique opportunities, but require careful collateral selection.

This flexibility allows greater control over your lending portfolio, letting you adjust conditions based on market demand.

⛔ No Forced Liquidations — Defaults can be profitable!

Unlike other lending platforms, Rain.fi does not liquidate positions due to price volatility. Instead, if a borrower fails to repay, the lender receives their collateral in full — which can sometimes be worth more or less than the loaned amount.

Real Example: A borrower default leading to massive APY

• A lender issued a $5,000 USDC loan with a 50% LTV, backed by an NFT worth $10,000.
• The borrower did not repay, and the lender received the NFT.
• Over time, the NFT’s floor price surged to $50,000, turning what was supposed to be a single-digit APY loan into a multi-thousand percent return.

While defaults can be a risk, they can also present opportunities — especially if you select strong collateral assets.

📌 Tip: Well-selected collateral can make borrower defaults highly profitable, turning lending risk into an opportunity. 
However, the opposite is also true — poorly chosen collateral can result in significant losses if a borrower defaults, leaving the lender with a devalued asset.

⛓️ How Do Liquidity Pools Work?

A liquidity pool is a vault of assets that enables users to borrow and lend funds on a decentralized basis. On Rain.fi, liquidity pools are created by lenders, who deposit tokens or NFTs and set their own lending conditions. Borrowers then access these pools to take out loans by providing collateral, following the rules defined by the lender (Loan-to-Value (LTV), interest rate (APR), and loan term).

💦 How Lending Works on Rain.fi

Rain.fi enables users to lend their tokens or NFTs to borrowers in exchange for interest. This is done through customizable liquidity pools, where you define all loan terms. Borrowers can then access these pools to secure loans, using their own assets as collateral.

🛠️ Key Features of Lending:

▶ Customizable lending → Set your own APR, loan duration, and LTV.
▶ NFT & Crypto-backed lending → Accept both tokens and NFTs as collateral.
▶ Decentralized peer-to-peer model → No intermediaries, just direct interaction between lenders and borrowers.

Unlike traditional platforms where loan conditions are fixed, Rain.fi gives you complete control over your lending risk. Your returns depend on how you set your LTV, APR, and exposure.

💦 Our Guide: How To Create Your Pool Step by Step (Lite Option)

Since Rain.fi V2, it is now possible to create multiple liquidity pools. If you want to lend both Tokens and NFTs, you will need to create two separate pools, as each pool is tied to a single liquidity asset. 🚀

🍽️ Let’s create a Token Pool! ⬇️

1️⃣ Access to pool management section by following these steps:

Here we are!🚦

2️⃣ Now, time to set things up! 🔧

Here, enter the crypto asset and the amount you wish to place in your Pool

📌 Which asset should you choose for your liquidity pool?

• Stablecoins (USDC, USDT) → Choose this if you want to keep a stable asset in your pool.
• ⚠️ Cryptos (SOL, wETH, wBTC, JUP, Pyth, Memecoins etc.) → Select this if you prefer to hold a volatile asset while lending.

3️⃣ Set Your Loan Duration & APY: Define your pool’s strategy ⚙️

Choose the Loan duration and the APY you wish

☝️ Not sure what to choose? Scroll down in this article where we explain how to set the right LTV and APY for your lending strategy.

4️⃣ It’s time to select the assets you will lend! 🛒

Select all the borrowable tokens in your pool and set the LTV and Exposure for each one.

If you’re unsure about which loan duration and APY to choose, don’t worry! You’ll find more information and tips on setting the right pool parameters further down in this article. 📖

5️⃣ The last and easiest step to create your own pool!

Click on "Create Pool" Button and there you go! Your own pool is active! ✅

6️⃣ Manage your pool 💧

🎯 You’ve created your pool… now what? Managing it is the next step! Want to fine-tune your settings and keep your pool competitive? Dive into our 🔗 Pool Management Guide and take full control of your lending strategy!

📌 Understanding LTV: How to Set the Loan-to-Value Ratio?

The Loan-to-Value (LTV) ratio determines how much a borrower can take as a loan compared to the value of their collateral. It is expressed as a percentage:

LTV = (Loan Amount / Collateral Value) × 100

For example:

If a borrower provides 1,000 USD as collateral:

• With an LTV of 50%, they can borrow up to 500 USD.
• With an LTV of 70%, they can borrow up to 700 USD.

How to choose the right LTV?

Each lender decides their own risk level, and there is no single “best” LTV, just different strategies:

• Low LTV (10–40%) → Lower risk, lower returns, but safer in case of market drops.
• Medium LTV (40–70%) → Balanced approach, good mix of security and profitability.
• High LTV (70–90%) → Higher potential earnings, but greater risk if the collateral value drops.

Why some lenders offer higher LTV on certain assets?

Lenders may be more comfortable offering higher LTV on assets they trust, even if they are volatile. For example, some lenders do not worry about a Solana-backed loan being liquidated because they expect SOL to recover over time.

💡 Tips for setting LTV:

✅ If you prefer security, lower LTV ensures your pool is less exposed to collateral devaluation.
✅ If you want higher interest rates, a higher LTV can attract borrowers willing to pay more but comes with greater risk.
✅ Adapt to market conditions — high LTV is more viable for stable assets, while volatile assets may require a more conservative approach.

📌 How to Choose Loan Duration & APY

⏳ Loan Duration:

- Short (1–7 days) → Faster liquidity turnover, lower exposure.
- Medium (7–30 days) → Balanced returns and borrower flexibility.
- Long (30+ days) → Higher total interest, but funds are locked longer.

📈 About the APY:

APY is indirectly linked to the LTV (Loan-to-Value) ratio: the higher the risk a lender takes, the higher the potential APY.
- Low LTV (10–40%) → Lower risk, APR 5–50%.
- Medium LTV (40–70%) → Balanced risk, APR 50–150%.
- High LTV (70–90%) → High risk, APR 150–300%+.

Each lender chooses their own strategy — there is no single “best” approach. Some prioritize low-risk steady returns, while others aim for higher APRs with more profitable loans but more risks. Define your pool settings based on your lending goals.

💡 Once set, these parameters define your pool’s earnings. You can adjust them later in Manage Pool. 🚀

What Happens If a Borrower Doesn’t Repay?

On Rain.fi, borrowers must repay or extend their loan before expiration. If they fail to do so:

• The collateral is automatically transferred to you → You receive their deposited assets.
• If the collateral has lost value, you take the loss.
• If the collateral is worth more than the loan, you make a profit.

💡 Example:

• You lend 500 USDC with a 50% LTV, and the borrower deposits $1,000 in SOL as collateral.
• If SOL drops to $600, you recover devalued collateral (potential loss).
• If SOL rises to $1,500, you profit from the appreciation.

📌 Tip: Setting a low LTV reduces risk and increases the chances of recovering valuable collateral.

📉 Can You Lose Money as a Lender?

⚠️ Risks of Lending on Rain.fi

Collateral Depreciation → If a collateral asset loses too much value, it may not cover the loaned amount.

Liquidity Risk → Deposited funds are locked while actively lent. Only unused liquidity can be withdrawn.

Market Conditions → High volatility may cause many borrowers to default, leading to losses if collateral depreciates.

🛡️ How to Reduce Risk?

✔️ Set a reasonable LTV → 40–60% LTV lowers default risk.
✔️ Choose strong collaterals → Prefer stablecoins or high-liquidity assets.
✔️ Adjust APR based on demand → Higher APR attracts riskier borrowers.
✔️ Don’t lend all your capital → Keep a portion outside your pool for flexibility.

Lite vs. Pro Mode: Which One to Choose for Your Lending Pool?

On Rain.fi, you can create a liquidity pool using two different modes, depending on your level of experience and customization needs:

• Lite Mode → A simplified interface for quickly setting up a pool, perfect for beginners or those who want an easy lending setup without advanced configurations.
• Pro Mode ⚙️ → Full control over loan parameters, allowing you to fine-tune APR, Loan-to-Value (LTV), Exposure, and other settings to maximize profitability and risk management.

Platform Fees as Lender:

• 5% of the interest received by the lender is taken by the platform.
• If Liquidation Auto Swap is enabled: Minimum 1% fee and 2% if the lender is in profit on the liquidated amount.

🔗 Our complete guide to manage your pool with Lite Mode

🚀 Want to start lending? Head over to Rain.fi, create your first lending pool, and start earning today!

📢 Need help? Join our Discord for expert advice and community support. Don’t forget to check our FAQ!

🔗 Rain.fi Links:

Site: https://rain.fi/
Discord: https://discord.gg/rainfi
Twitter: https://twitter.com/RainFi_
FAQ : https://app.rain.fi/faq

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