# Vaults Overview

A vault functions as a specific container within which you can place collateral to borrow KEI and manage your loan. Each vault is associated with a unique EVM address, and only one Vessel per collateral type is allowed per address. If you've used Vaults or Collateralized Debt Positions (CDPs) on other platforms, vaults operate under a similar principle.

### Collateral Ratio and Loan to Value

The terms Collateral Ratio and Loan-to-Value (LTV) ratio are both used to describe the relationships between the collateral, the borrowed amount, and the value of the collateral. Understanding the distinction between these two concepts is crucial for users who want to maintain a healthy position in the protocol.<br>

#### Collateral Ratio

The Collateral Ratio represents the percentage ratio of the total value of the collateral to the total value of the borrowed amount. This metric shows the extent to which the borrowed amount is backed by the collateral, highlighting the level of risk for a specific loan.<br>

$$
CR = (Collateral Value / Debt Value) \* 100
$$

#### Loan to Value

The Loan-to-Value (LTV) ratio is the percentage that describes the total value of the borrowed amount relative to the total value of the collateral. This ratio is used to indicate how much of the collateral's value is being utilized in the borrowing, reflecting the coverage level of the loan by the collateral.<br>

$$
LTV = (DebtValue / CollateralValue) \* 100
$$


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