> For the complete documentation index, see [llms.txt](https://docs.sturdy.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.sturdy.finance/overview/interest-rates.md).

# Interest rates

Each silo has its own interest rate contract set at deployment. To date, they've all followed a model using following variables:

*Utilization:* Amount of borrowed funds divided by amount of lent funds

*Base Rate*: Borrow rate when utilization is 0% (i.e. no funds are borrowed)

*Optimal Utilization*: A fixed utilization rate

*Optimal Rate*: Borrow rate when utilization is equal to optimal utilization

*Maximum Rate*: Borrow rate when utilization is 100% (i.e. all funds are borrowed)

If the utilization rate is less than or equal to the optimal utilization, then

`BorrowAPR = Base Rate + Utilization x ((Optimal Rate - Base Rate) / Optimal Utilization)`

If the utilization rate is greater than the optimal utilization, then

`BorrowAPR = Optimal Rate + ((Utilization - Optimal Utilization) x ((Maximum Rate - Optimal Rate) / (1 - Optimal Utilization)))` 

Here is a visual representation of this formula (courtesy of [Frax Finance](https://docs.frax.finance/fraxlend/advanced-concepts/interest-rates#linear-rate)):<br>

<figure><img src="/files/Lr3ynxPIqA3QSjerfWO0" alt=""><figcaption></figcaption></figure>

### Fees

10% of interest paid by borrowers is collected as a fee. The remaining 90% is paid to lenders.