Fixed-rate lending

A fixed-rate position locks in both the interest rate and the term length when it is initiated. Both inputs are set once, at the moment of the match, so both sides know the terms upfront. Every position has an explicit end date called its maturity. The term is agreed upfront and defines exactly when repayment is due.

On Tenor

When you initiate a fixed-rate position on Tenor, you place either a market order or a limit order:

• Market order: fill right away at the best rate currently available.
• Limit order: set the rate you want and wait for a counterparty to match it.

See order types for how each one works and what happens to your capital while a limit order waits.

Every match is peer-to-peer. The borrower posts collateral and the lender supplies funds at the agreed rate and term, and the position is initiated and settled onchain through Morpho Midnight (fixed-rate, fixed-term markets) smart contracts.

Each market sets its terms in advance: the loan token, the accepted collateral tokens (each with its own oracle and LLTV), and the maturity are fixed and shared by everyone in the market. Only the rate and the filled amount vary from one match to the next.

Example

Consider a USDC market collateralized by cbBTC, priced by a Chainlink BTC/USD oracle, with an 86% LLTV and a maturity 30 days out. A lender supplies 1,000 USDC at a 5% fixed rate until that maturity. From the moment the position is matched:

• The lender's 1,000 USDC is locked in the market for the full 30 days at 5%.
• The borrower posts cbBTC collateral and owes the outstanding debt on the agreed schedule.
• At maturity, the lender is owed 1,004.11 USDC:

$$1{,}000 \times \left(1 + \tfrac{30}{365} \times 5\%\right) \approx 1{,}004.11 \text{ USDC}$$

At maturity

Borrowers can repay and close their position at any time before maturity. At maturity, the outstanding debt is due. Borrowers can settle the debt, or opt in to Tenor's auto-renewal smart contracts to roll into a new term automatically. Once the debt is repaid or renewed, the lender withdraws their principal plus the accrued interest.

If the debt is neither repaid nor renewed, Morpho Midnight enables post-maturity liquidation: a third-party liquidator repays a portion of the outstanding debt and receives an equivalent amount of the borrower's collateral plus the liquidation bonus. The lender is repaid from that repayment; any collateral left after the seizure stays with the borrower.

warning

If a borrower is liquidated and their debt can't be fully repaid by the liquidation (for example, when collateral value falls faster than liquidators can act), the shortfall becomes bad debt. On Morpho Midnight, bad debt is socialized across all lenders in the market: each lender's position is slashed proportionally, reducing the amount they can withdraw.