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Lending through Synclear credit pools offers structured returns backed by underwritten borrowers, but it is not without risk. This page details the risk and return profile across pool types, explains how collateral and tranche seniority protect lender capital, and outlines what happens in default scenarios.
All lending activity involves the risk of partial or total loss of principal. Credit pools on Synclear are not insured. Borrower default, collateral value deterioration, or extreme market conditions may result in lenders recovering less than their committed capital. Review all pool parameters and borrower disclosures thoroughly before committing funds.

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Interest Rates by Pool Type

Interest rates on Synclear pools reflect borrower credit quality, collateralization, loan-to-value ratio, and term structure. The table below presents indicative ranges; actual rates are set at pool creation and visible on each pool’s detail page. Rates in variable-rate pools adjust dynamically along a utilization curve. As borrower drawdowns push utilization higher, the interest rate increases, rewarding lenders for reduced liquidity and incentivizing borrower repayment.

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Collateralization

Overcollateralized pools. Borrowers post on-chain or custodied off-chain collateral exceeding the credit limit. If the collateral-to-debt ratio falls below the liquidation threshold (defined per pool), the collateral is liquidated to repay lenders. Liquidation is triggered automatically on-chain for on-chain collateral; off-chain collateral liquidation follows the legal enforcement process defined in the borrower’s loan agreement. Reserve requirements. Some pools require borrowers to maintain a cash reserve (on-chain) equal to a defined percentage of outstanding borrowed balance. This reserve is the first line of recovery in a default. Legal recourse. All borrowers on Synclear execute a legal loan agreement with the protocol’s legal entity. This provides lenders with off-chain recourse independent of smart contract enforcement.

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Tranche Seniority

Certain pools are structured with senior and junior tranches. Capital is deployed into a shared pool, but recovery priority in a default scenario follows tranche seniority:
Senior lenders have first claim on recovered capital. In a partial recovery, senior lenders are made whole before junior lenders receive any repayment. Senior tranches carry lower interest rates reflecting their protected position.
Junior lenders absorb first-loss exposure in exchange for higher interest rates. Junior capital acts as a buffer protecting senior lenders from moderate losses. Junior lenders are only repaid after all senior obligations are satisfied.
Blended pools have no tranche structure. All lenders share recovery proceeds pro-rata. These pools typically apply to lower-risk, shorter-term credit facilities with strong collateral backing.

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Default Scenarios and Recovery

If a borrower misses a scheduled repayment or breaches a pool covenant, the pool enters a grace period (typically 5 business days). If the default is not cured within the grace period, the pool transitions to Default status. Upon default:
  1. Drawdowns are suspended. The borrower can no longer access uncommitted credit limit.
  2. On-chain collateral liquidation. If the pool holds on-chain collateral, liquidation proceeds automatically. Recovered assets are distributed pro-rata to lenders (respecting tranche priority where applicable).
  3. Off-chain recovery. Synclear’s legal and collections team initiates recovery proceedings against the borrower under the signed loan agreement. Recovery timelines for off-chain proceedings vary; lenders are notified of material updates via the dashboard and email.
  4. Final distribution. Recovered proceeds, net of legal and administrative costs, are distributed to lenders in order of seniority.
During default proceedings, lenders cannot withdraw capital. Accrued interest stops compounding at the point of default declaration. Any recovery is distributed as a lump sum upon conclusion of proceedings.

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Performance Expectations

Synclear does not guarantee returns. Past pool performance and borrower repayment history are displayed on each borrower’s profile page and in the protocol’s public analytics dashboard. Lenders are encouraged to review:
  • Borrower repayment history and days-past-due metrics
  • Pool utilization trends
  • Collateral quality and liquidation history (if any)
  • Synclear’s aggregate historical default rate and recovery rate, published quarterly in the protocol’s transparency report