Lending platform on Solana

As the Solana ecosystem has begun to take shape, the demand for loans has become increasingly prominent. There are currently 4 mainstream lending platforms on Solana: Solend, Larix, Apricot, and Port. Most Solana users should have experienced these platforms, but few users know they have been "secretly" charged a borrowing fee by these lending protocols, and the fee is not little.

What is the Borrowing Fee?

Borrowing Fee is the fee you pay when you make a loan, which is different from borrowing interest.

Borrowing Interest= borrow amount * borrow APY * borrow time period. The larger the borrow amount, the higher the båorrow APY, and the longer the borrow period, the higher the borrow interest.

Borrowing Fee= borrow amount * protocol fee rate, the larger the loan amount or the higher the protocol fee rate is, the higher the borrowing fee. That is to say, when you borrow, in addition to the borrow interest, the lending platform will also charge you a borrowing fee upon origination of a loan.

How is the borrowing fee charged?

Take Solend as an example. If you borrow $1 million, in addition to pay interest on the loan, Solend will also charge you a one-time borrowing fee of $1,000. If you borrow another $1 million after repayment, the platform will charge you another $1,000 borrowing fee. The borrowing fee is charged according to the number of times. No matter how long you borrow, as long as you borrow tokens, you will be charged for the borrowing fee. Remember, you will be charged once for each loan.

Why is the borrowing fee unfair?

First, the borrowing fee itself is unfair, and it is purely an act of exploitation. AAVE, Compound and Venus, these big lending platforms on ETH and BSC do not have the so-called borrowing fee. The platform has already charged the borrowing interest, why do users need to pay an additional borrowing fee?

Second, these lending platforms that charge borrowing fees have not fulfilled their obligation to inform. Many users are unaware of these hidden fees. After borrowing money, they don’t even know they have been charged a borrowing fee by the platform, because these platforms are smart enough to only mention borrowing cost in official docs not on their lending interface.Unless you go to the community and question the administrators, few people know that there is a hidden borrowing fee.

How to avoid hidden borrowing fees?

The borrowing fee is charged upon the origination of a loan, so if you want to incur less charges, you should try to borrow in low frequency. The best option is to choose a platform that does not charge a borrowing fee. Especially for investors who need to operate frequently on various platforms for arbitrage, it is strongly recommended not to borrow money from platforms with borrowing fees, such as Solend, which charges a 0.1% protocol fee. It doesn't seem like much at first, but it is charged according to the number of times. Among the largest lending platforms on Solana, only Larix currently has no borrowing fee, and it can be considered conscientious.