Learn how to supply assets, earn yield, and borrow safely on Aave with clear, battle-tested steps and guardrails. Includes risk controls, fee notes, and liquidation prevention tips. Download: Aave Lending Tutorial — Step-by-Step Checklist (PDF).
- Set up a Web3 wallet, pick a network, and fund gas first.
- Choose assets with strong liquidity and healthy LTVs.
- Keep Health Factor > 1.8; repay or add collateral on dips.
- Use alerts and cool-downs; never borrow against volatile pairs only.
What you’ll learn and who this is for
Searching for an aave lending tutorial often returns generic advice and risky shortcuts. This guide focuses on practical steps that actually reduce mistakes when you interact with Aave markets.
You will learn how Aave pools work, which parameters matter, and how to supply, borrow, repay, and withdraw without tripping liquidation bots. If you are completely new to crypto, start with our internal Beginners hub, then return here to complete your first safe deposit and test borrow. Experienced users can jump to the step-by-step section and the Risk Controls table, then fine-tune with the FAQ.
How Aave works (in one paragraph)
Pools, not peer-to-peer. On Aave, depositors supply assets into shared liquidity pools and receive interest-bearing tokens. Borrowers draw from those pools by posting collateral. All the action is on-chain. Smart contracts enforce collateralization, apply interest, and trigger liquidations if the Health Factor drops below 1.
Markets vary by network. ETH mainnet, Optimism, Arbitrum, Base, Polygon and others each have distinct costs and supported assets. Rates float. Variable rates move with utilization; some markets offer a “stable” rate that can rebase. Risk is transparent. Each asset has policy limits (LTV, liquidation threshold, caps) that shape how much you can safely borrow.
Prerequisites, safety and setup
Wallet & gas. Install a trusted wallet (e.g., MetaMask) and fund it with network gas (ETH on Ethereum, MATIC on Polygon, etc.). Official URLs only. Access Aave via the canonical app link from the docs to avoid phishing. Pick your network intentionally. L2s cut fees but have different asset lists. Asset selection matters. Prefer blue-chip collateral with deep liquidity and conservative parameters.
Operational hygiene. Back up your seed phrase offline, enable hardware-wallet approvals for larger positions, and set price alerts before you borrow. If you need tooling later, check our internal Tools page and the general How-To Tutorials index.
Step-by-step guide: deposit, borrow, repay
- Prepare wallet and gas. Top up a small amount of native gas token for approvals and transactions. Confirm your wallet network matches the Aave market you plan to use.
- Choose network and market. Open Aave and select the chain (e.g., Optimism). Review supported assets and their risk metrics. Favor assets with higher liquidity and moderate LTVs.
- Check asset risk. For your intended collateral, note LTV, liquidation threshold, and any isolation or caps. Plan a conservative target borrow (often ≤ 30–40% of max).
- Connect wallet and enable tokens. Connect, approve the token you’ll deposit, and verify the spender address is the official Aave contract before confirming.
- Deposit collateral. Supply a starter amount first to test fees and flows. After confirmation, you’ll see interest-bearing tokens in your wallet/account.
- Borrow safely. Select a borrow asset and start small. Choose variable or “stable” rate if the market supports it. Keep your Health Factor comfortably high.
- Monitor and maintain. Track Health Factor and utilization. If markets move against you, add collateral or repay promptly. Set alerts for price and HF thresholds.
- Repay and withdraw. When done, repay the loan plus accrued interest. Once no debt remains, withdraw your collateral back to your wallet.
Risk controls you should not skip
Health Factor cushion. Target HF ≥ 1.8 after borrowing to absorb volatility. Collateral mix. Avoid borrowing only against highly volatile assets. Automation with restraint. If you use bots, enforce cool-downs and caps.
Exit readiness. Keep some native gas and a small amount of the borrow asset available to repay quickly. When nervous, deleverage. Repay part of the loan or add collateral—do not wait for liquidations.
| Term | What it means | Why it matters | Typical note |
|---|---|---|---|
| LTV (Loan-to-Value) | Borrow limit versus your collateral value. | Higher LTV allows more borrowing but raises liquidation risk. | Stay well below the max (e.g., ≤ 40% for volatile pairs). |
| Liquidation threshold | Point where positions become liquidatable. | Crossing it lets liquidators repay and seize collateral plus a bonus. | Watch Health Factor to avoid ever approaching this line. |
| Health Factor (HF) | Safety score; liquidation at HF < 1. | Primary early-warning signal under volatility. | Keep HF ≥ 1.8; add collateral or repay on dips. |
| Variable vs. Stable rate | Floating rate vs. a rate that aims to be steadier. | Rate choice affects costs and rebase behavior. | Stable can reprice; variable shifts with utilization. |
| Isolation/Caps | Protocol limits on certain assets. | Constrain how much can be borrowed or supplied. | Check the market’s per-asset caps before sizing. |
Fees, gas and hidden costs
Gas costs. Every approval, deposit, borrow, repay, and withdraw uses blockspace and incurs gas. Layer-2 networks are cheaper than mainnet but still fluctuate. Interest rates. Your borrow APR is the main ongoing cost; supply APR offsets it if you deposit yield-bearing collateral.
Rate mode switches. Switching between variable and “stable” rates may cost gas and can have constraints. Liquidation penalty. Avoid it entirely by maintaining Health Factor. Bridging costs. Moving assets across chains adds fees and time—plan your network up front.
Troubleshooting and common mistakes
Transactions failing. Raise gas or priority fee modestly, or try later if the network is congested. Approvals stuck. Reset nonce and send again, but only via your wallet’s official tools. Collateral not visible. Ensure you are on the correct network and market; refresh your subgraph/cache view. HF too low after a drop. Add collateral, repay part of the loan, or both; do not rely on luck.
Wrong token. If you deposited the wrong asset, repay any borrow, withdraw, and start over—avoid complex swaps under pressure. For downloadable runbooks and printable sheets, visit Downloads.
FAQ
Is Aave non-custodial and open-source?
Yes, Aave is non-custodial, and its core contracts are open-source and controlled by governance votes.
What is Health Factor and what number is safe?
Health Factor reflects collateral safety; liquidation occurs below 1. Aim for 1.8 or higher after borrowing.
Should I use stable or variable borrow rate?
Variable tracks utilization and can be cheaper at times; “stable” can reprice but aims to be steadier. Pick based on horizon and rate outlook.
Can I lose my deposit on Aave?
Liquidations affect borrowers; depositors face smart-contract and market risks. Review asset caps, oracle design, and Safety Module details.
Which network is cheapest for beginners?
Layer-2 networks like Optimism, Arbitrum, Base or Polygon often have lower gas than mainnet, but check current fees.
How do I avoid liquidation?
Borrow conservatively, keep HF high, diversify collateral, set alerts, and top up or repay early during volatility.
Are there fees to deposit or withdraw?
Aave does not charge typical “deposit/withdrawal” fees, but you pay network gas and any rate-mode costs.
Sources & references
- Aave Protocol Documentation
- Aave FAQ and Key Concepts
- Ethereum.org — Gas and fees
- MetaMask Support — Official help center
- Chainlist — Verified networks and RPC endpoints
Final call to action. Aave Lending Tutorial — Step-by-Step Checklist (PDF).
Important disclaimer
Important: The information on this page is for educational purposes only and does not constitute investment advice. The views expressed reflect the authors’ opinions. Always do your own research and make decisions based on your personal circumstances — you are solely responsible for your funds and risks. Act with caution and protect your capital.
