# Lending Pools and Collateral ## Lending Pools Impermax architecture is based on isolated Lending Pools. Anyone can create a new Lending Pool through the Impermax Factory contract in a permissionless way. This is possible because the architecture isolates also the risks to individual Lending Pools. If a borrower is liquidated in one Lending Pool, then the other Lending Pools will not be affected. At the same time if a Lending Pool with a weak or malicious collateral is created, this won't affect the safety of the funds on all the other Lending Pools. Certain tokens like ETH will be borrowable in multiple Lending Pools. Lenders will be free to choose in which one they lend their ETH, and we should expect the ETH interest rate to be different across them. This is a great way for both borrowers and lenders to better manage their risks. ## Collateral Impermax allows borrowers to use AMM LP tokens as collateral. At any given point in time the value of the ABC/XYZ LP token is backed 50% by ABC and 50% by XYZ. We use this property to create an optimal collateralization model to ensure loans backed by LP tokens are as safe as possible. The collateralization model calculates how much collateral is needed for a loan to be able to pay back the lender if there is a price swing between the two assets in the LP token. If the price swing is higher than the specified safety margin, the loan becomes liquidatable. Since each pair may have different price volatility expectations, the safety margin for each pair is specified in each LP token pair contract. The default setting allows one asset to increase by up to 150% or decrease by 60% with respect to the other. However, stablecoin pairs are often set with low safety margins, which allow for much higher max leverage. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.impermax.finance/protocol/lending-pools-and-collateral.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.