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The kinked rate model

Varla uses a utilization-based interest rate model:
  • Low utilization → low rates (cheap to borrow)
  • High utilization → rates spike (incentivizes repayment)
The “kink” is at 80% utilization — rates climb faster above this threshold.
Borrow rates are variable. If pool utilization rises, your borrowing cost increases automatically.

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How rates are calculated

Utilization = Total Borrowed / Total Assets

Below 80%:  Rate = 2% + (Utilization × 7.5%)
Above 80%:  Rate = 2% + 7.5% + ((Utilization - 80%) × 100% / 20%)

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Example rates

UtilizationBorrow APR
0%2%
40%~5.75%
80% (kink)~9.5%
90%~59.5%
100%~109.5%
Above 80% utilization, rates spike aggressively. This is by design — it discourages over-borrowing and protects lender liquidity.

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What this means for borrowers

  • Monitor utilization — if the pool is heavily utilized, your costs rise
  • Interest accrues continuously — debt grows over time, lowering HF
  • No fixed-rate option — you can’t lock in a rate

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What this means for lenders

  • Yield = utilization × rate × (1 - reserve fee)
  • High utilization = higher yield (but also less withdrawable liquidity)
  • 10% reserve fee is collected from borrower interest as first-loss coverage

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Where to check rates

Use the SDK: 
import * as views from "@varla/sdk/views";

const rates = await views.readPoolRates({ pool, client });
// rates.supplyAPY, rates.borrowRate, rates.utilizationWad