Exit Early

Fixed-rate, fixed-term positions on Tenor can be exited at any time before maturity. Users can either repay their position in full or sell it to another user.

Repay Position in Full

Borrowers can repay their position at any time by paying back the borrowed amount plus the full interest owed.

Example

A user borrows 1,000 USDC at 5% APR for 1 month. The interest owed is:

$$1{,}000 \times 5\% \times \frac{1}{12} = 4.17 \text{ USDC}$$

To exit the position early, the borrower repays 1,004.17 USDC (principal + interest) and the position is closed.

The lender who was matched with the borrower receives the 1,004.17 USDC.

Sell Position

Alternatively, borrowers and lenders can sell their position to another user who is willing to take it over. When selling a position, borrowers and lenders may realize a mark-to-market gain or loss depending on how interest rates have moved since their position was opened.

• If rates have risen
  • Borrowers: locked-in a lower rate than the current market rate, making their position attractive to buyers. They may realize a gain by selling their position.
  • Lenders: hold a position at a lower rate than the current market rate, making it less attractive in the current market. They may realize a loss by selling their position.
• If rates have fallen
  • Borrowers: locked-in a higher rate than the current market rate, making their position less attractive. They may realize a loss by selling their position.
  • Lenders: hold a position at a higher rate than the current market rate, making it more attractive in the current market. They may realize a gain by selling their position.

Example: Rates Rise to 7%

Borrower

A user had borrowed 1,000 USDC at 5% APR for 1 month, owing 1,004.17 USDC at maturity.

If a new user were to open a new borrow position at 7%, they would owe the following at maturity:

$$1{,}000 \times \left(1 + \frac{7\%}{12}\right) = 1{,}005.83 \text{ USDC}$$

The original position only requires repaying 1,004.17 USDC at maturity vs 1,005.83 USDC for a new position at the current market rate. The change in interest rate has increased the value of the original position in the market. Therefore, the original borrower would realize a gain by selling their position at the current market rate.

Lender

A user had lent 1,000 USDC at 5% APR for 1 month, earning 1,004.17 USDC at maturity.

If a new user were to open a new lend position at 7%, they would earn the following at maturity:

$$1{,}000 \times \left(1 + \frac{7\%}{12}\right) = 1{,}005.83 \text{ USDC}$$

The original position earns 1,004.17 USDC at maturity vs 1,005.83 USDC for a new position at the current market rate. The change in interest rate has decreased the value of the original position in the market. Therefore, the original lender would realize a loss by selling their position at the current market rate.

Example: Rates Fall to 3%

Borrower

A user had borrowed 1,000 USDC at 5% APR for 1 month, owing 1,004.17 USDC at maturity.

If a new user were to open a new borrow position at 3%, they would owe the following at maturity:

$$1{,}000 \times \left(1 + \frac{3\%}{12}\right) = 1{,}002.50 \text{ USDC}$$

The original position requires repaying 1,004.17 USDC at maturity vs 1,002.50 USDC for a new position at the current market rate. The change in interest rate has decreased the value of the original position in the market. Therefore, the original borrower would realize a loss by selling their position at the current market rate.

Lender

A user had lent 1,000 USDC at 5% APR for 1 month, earning 1,004.17 USDC at maturity.

If a new user were to open a new lend position at 3%, they would earn the following at maturity:

$$1{,}000 \times \left(1 + \frac{3\%}{12}\right) = 1{,}002.50 \text{ USDC}$$

The original position earns 1,004.17 USDC at maturity vs 1,002.50 USDC for a new position at the current market rate. The change in interest rate has increased the value of the original position in the market. Therefore, the original lender would realize a gain by selling their position at the current market rate.