A 12% APY exists because borrowers are paying it today. It can become 3% in a week without a single bad loan.

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Lending rates are a utilization signal, not a yield promise

A 12% APY exists because borrowers are paying it today. It can become 3% in a week without a single bad loan.

Filed in Verified October 27, 2026 1 min read
Lending rates are a utilization signal, not a yield promise
In this article · 3 sections
  1. Where the rate comes from
  2. The trade you are actually making
  3. A better question than APR

TL;DR

A 12% APY exists because borrowers are paying it today. It can become 3% in a week without a single bad loan.

Key takeaways

  • Check utilization before deposit size.
  • Model the rate after a 20% withdrawal.
  • Treat a kink jump as a risk signal.
Verified October 27, 2026 1 min read

Lending rates are a utilization signal, not a yield promise

Where the rate comes from

A lending pool prices liquidity, not credit. When almost everything is borrowed, the marginal borrower pays a steep rate, and that rate is passed to suppliers as yield. The mechanism is arithmetic, and it is indifferent to whether the borrower is good for the money.

The trade you are actually making

You are supplying cash to a pool and earning the borrow rate. In exchange you accept that your capital is illiquid exactly when the market is stressed — which is also when the rate looks most attractive.

Utilization Typical effect Liquidity to withdraw
Under 60% Low, stable rate Plenty
80–90% Rate climbing Thin
Above kink Steep rate, spikes Often zero

A better question than APR

Ask what the rate becomes if 20% of suppliers leave. If the answer is a kink jump, you are being paid for liquidity risk you cannot hedge.

How we verify

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Every offer is re-checked against the official terms page, the bonus amount and the expiry date before it is published, and again whenever a campaign changes.

Last verified October 27, 2026 Text-only version Corrections

Frequently asked questions

Why is the APY so high?

Because utilization is near the kink and borrowers are paying a premium for the last available liquidity. It falls as soon as borrowing demand drops.

Can I always withdraw?

Only up to the liquidity that has not been borrowed. In a full pool, you wait for repayments or for new deposits.

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