How Alchemix v3 Self-Repaying Loans Work: Calculations

Alchemix v3 separates debt repayment from yield generation. According to the official loan documentation, scheduled Transmuter redemptions remove MYT collateral and cancel an equal amount of debt. Yield refills collateral rather than reducing debt directly. Consequently, “debt divided by annual yield” is not a v3 repayment forecast.

Example 1: borrowing capacity

Let collateral C = 10,000 USDC and debt D = 5,000 alUSD. Starting LTV = D / C = 50%. The documented v3 ceiling is 90%, so a face-value deposit of 10,000 supports at most 9,000 debt under that setting. Available capacity, vault valuation and market status still need checking in the app. A lower starting LTV leaves a larger buffer against a decline in MYT backing.

Example 2: a redemption reduces both balances

Assume a scheduled redemption cancels 1,000 alUSD of this position's debt. Before fees, collateral falls from 10,000 to 9,000 and debt from 5,000 to 4,000. LTV becomes 4,000 / 9,000 = 44.44%. No new external money was added: the repayment used collateral already inside the position.

The official fee schedule, checked on 16 October 2026, lists a 0.25% borrower redemption fee for Ethereum. On this 1,000 redemption the fee is 2.50, not 25 on the entire original deposit. Ignoring yield and other costs, remaining collateral becomes 8,997.50 and LTV is approximately 44.46%. This static documentation example is not a live fee quote.

Example 3: yield can offset collateral outflows

For a deliberately simplified annual scenario, suppose 10,000 collateral earns a hypothetical 5% gross yield: 500 before performance fees. The documented Ethereum USDC MYT yield fee is 15% of yield, so 500 × (1 − 0.15) = 425. This fee applies to yield, not 15% of the principal. If gross yield is zero, there is no positive yield to distribute.

If the same interval also removes 1,002.50 through the redemption above, adding a hypothetical 425 net yield leaves 9,422.50 collateral. Real yield accrues on changing balances, so this deliberately fixed-base illustration is not an exact time-series model. It shows why falling debt does not guarantee that your original collateral remains intact.

Why the old ten-year estimate is not a promise

A yield-only educational model would estimate 5,000 / (10,000 × 5%) = ten years; at 2.5% net yield it would give twenty years, and borrowing 2,500 at 5% would give five. Those are arithmetic scenarios with constant principal, constant net rates and no additional costs. They are not current v3 repayment dates. Scheduled redemptions, their term and system participation determine debt cancellation; yield and fees determine collateral evolution.

Before applying these numbers

Check the live vault yield, fee schedule, debt split and current redemption terms. Do not subtract a performance fee again if the quoted yield is already net. Learn how Transmuter maturity and market prices differ, then use the MYT loss calculation to stress-test your chosen LTV. For manual repayment, follow the position-management checklist rather than relying on an outdated button sequence.

Build a position ledger rather than a repayment countdown

A simple ledger is often more informative than a single estimated payoff date. Begin with the opening collateral and debt. Record deposits, withdrawals, debt minted, debt settled, redemption outflows, fees and any earnings separately. The closing balances should be interpreted in light of those movements. This makes it possible to distinguish normal settlement from a loss and fresh deposits from investment returns.

For collateral, the conceptual reconciliation is opening value plus added collateral and net earnings, less withdrawals, redemption outflows, applicable fees and losses. For debt, track new borrowing separately from cancellation or manual settlement. Actual contract accounting and valuation may have further details, so use this framework to understand the app rather than claiming it reproduces every internal calculation.

Why timing changes an illustrative result

The annual yield example above deliberately holds the earnings base fixed. A real position can change throughout the interval. If a redemption removes collateral earlier, less value may remain exposed to later earnings. If new collateral is deposited, a larger closing balance may reflect that contribution. A constant-rate calculation cannot establish the effects of every possible sequence.

Likewise, an annualized display does not mean the same amount will be earned in each month. Read the yield figure's methodology, measurement period and fee treatment before applying it to a scenario. Avoid combining a historical gross return with a future net return as if both were directly comparable. The aim of a worked example is to expose assumptions, not conceal uncertainty behind a precise-looking date.

Interpreting falling collateral without ignoring risk

If collateral falls because it was used to cancel debt, that movement has a different meaning from an unexplained strategy loss. Both reduce the collateral balance, but only the settlement also removes the corresponding obligation. On the other hand, labeling every decline as normal repayment could conceal a loss. Compare the collateral movement with the recorded debt cancellation and fee information.

For an economic assessment, also include the liquidity already received and what remains after an exit. Loan proceeds are not investment profit, and a canceled loan is not evidence that all original principal has been preserved. The borrower's overview connects those accounting questions to practical exit planning, while the security overview explains changes caused by backing risk.