> For the complete documentation index, see [llms.txt](https://bumup.gitbook.io/vanilla/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://bumup.gitbook.io/vanilla/features/borrow/interest-rate.md).

# Interest rate

## Utilization rate

$$
utilizationRate = \dfrac{totalBorrows}{(remainingLiquidity + totalBorrows - totalReserves)}
$$

This means percentage of borrowed BUM from total BUM liquidity.

ex) if 10000 BUM are borrowed and total liquidity is 100000, total reserves are 20000, then utilization rate will be 10000 / (100000+10000-20000) = 1/9, approximately 11%.

## Borrow rate

Borrow rate will be calculated with utilization rate (percentage) as below (per year, blocks per year as 2102400).

$$
\begin{cases}
borrowRate = 0.5 \* utilizationRate + 0.01 &\text{if } utilizationRate \le 0.8 \\
borrowRate = 3.5(utilizationRate-0.8) + 0.41 &\text{if } utilizationRate > 0.8
\end{cases}
$$

<figure><img src="/files/sDKvGO8aEjEMidANZZ3I" alt=""><figcaption></figcaption></figure>

Borrow rate will start from 1%, increasing slightly until utilization rate 80%, and then will sharply increase.

ex) If current utilization rate is 10%, then borrow rate will be 0.5\*0.1+0.01 = 0.06, so 6% annual rate. If current utilization rate is 90%, 3.5(0.9-0.8)+0.41 = 0.76, so 76% annual rate.