When you borrow against crypto on a lending protocol, the wallet that supplies the collateral is the one that takes the loan and carries the liquidation risk. That setup fails anyone with idle collateral who wants a trusted partner to borrow against it without receiving the tokens. Credit delegation exists to separate those roles.
On Aave, a supplier can approve another wallet to borrow against the supplier's collateral, and the borrower receives the tokens while the debt is recorded on the supplier's account. Because the collateral and the Health Factor that triggers liquidation stay with the supplier too, the lender keeps the liquidation risk. A borrow that would push that Health Factor below 1 fails (source: Aave Docs, Credit Delegation).
What is Aave credit delegation?
Aave credit delegation is a lending feature in which a supplier, called the delegator, lets another address, called the delegatee, borrow against the delegator's collateral up to an approved amount. The delegatee receives the borrowed tokens while the debt, the collateral and the liquidation risk stay on the delegator's account (source: Aave Docs, Credit Delegation).
| Role | What they do | What they carry |
|---|---|---|
| Delegator (supplier) | Supplies collateral, approves an amount for each debt asset, sets the account's E-Mode category | The debt, the Health Factor and the liquidation risk on that collateral |
| Delegatee (borrower) | Calls borrow up to the approved amount and receives the tokens | The borrowed tokens, which they can spend or move like any other balance |
Credit delegation relies on two kinds of ERC-20 token that every Aave V3 market already uses. When you supply an asset, the protocol mints Aave aTokens such as aUSDC, interest-bearing ERC-20 tokens whose balance grows with borrowing activity in the pool. When anyone borrows, the debt appears as a variable debt token such as variableDebtUSDC, an ERC-20 token that tracks the amount owed and accrues interest over time (source: Aave Docs, Aave V3 Overview).
Credit delegation works through that second token, since the approval is stored on the variable debt token of the asset the delegatee will borrow, so delegating USDC credit and delegating WETH credit are two separate approvals. For the delegator, the appeal is extra yield on top of the supply interest that the same collateral already earns in the pool (source: Aave Docs, Credit Delegation).
The delegation functions are part of the Aave V3 contracts, where every debt token that supports credit delegation exposes the same approval, allowance and signed-approval calls (source: Aave GitHub, ICreditDelegationToken.sol). Aave V4 went live on Ethereum on March 30, 2026 with a Hub and Spoke architecture, in which Spokes with their own collateral types and liquidation rules draw on a shared Liquidity Hub (source: Aave Labs, Aave V4 is Live on Ethereum). Before you approve credit, confirm that the market you use runs on V3, because the approval applies only to the V3 debt token you call it on.
Everything else about the Aave protocol stays as it is for an ordinary supplier. Your collateral still earns supply interest, prices still come from the same oracles, and the same liquidation rules apply, so the only new element is a second address that may open debt on your account.
How to approve credit delegation on a debt token
You approve credit delegation by calling approveDelegation on the variable debt token for the asset you lend, with the delegatee's address and a maximum amount. The delegator makes this call, or its signed form delegationWithSig, once for each debt token. The approval is valid even before any collateral is supplied (source: Aave Docs, Credit Delegation).
The approval takes five steps from the delegator's wallet:
- Choose the asset the delegatee will borrow and find its variable debt token, for example variableDebtUSDC for USDC.
- Call
approveDelegationon that token with the delegatee's address and the most you are willing to let them borrow. - Supply enough collateral to cover that amount, if you have not already, because a delegated borrow needs the delegator's collateral in place first.
- Read
borrowAllowancewith your address and the delegatee's address to confirm the figure the token stored. - Tell the delegatee which asset and amount you approved, since they will name your address when they borrow.
The amount you pass is a ceiling that replaces the previous one. Each call writes the new figure straight over the stored allowance for that delegator and delegatee pair (source: Aave GitHub, DebtTokenBase.sol). Approving 5,000 USDC after 10,000 USDC therefore leaves 5,000 USDC, and approving 0 removes the credit. ERC-20 token approvals follow the same rule, where calling approve a second time replaces the existing allowance with the new value (source: Ethereum Improvement Proposals, ERC-20 Token Standard).
The signed form suits a delegator who wants someone else to pay the gas. With delegationWithSig, you sign the approval off-chain as an EIP-712 message, a standard for hashing and signing typed structured data such as an address and an amount (source: Ethereum Improvement Proposals, EIP-712). Any wallet can then submit that signature, because the debt token records the allowance only after it confirms that the delegator signed the message (source: Aave GitHub, DebtTokenBase.sol).
How a delegatee borrows with onBehalfOf
The delegatee borrows by calling borrow on the Aave Pool and putting the delegator's address in the final parameter, onBehalfOf. The borrowed tokens go to the delegatee's wallet and the new debt is recorded on the delegator's account. Each borrow lowers the delegatee's available credit by the amount borrowed (source: Aave Docs, Credit Delegation).
A delegated borrow uses the same Pool function as an ordinary Aave borrow, and what changes is the address in onBehalfOf together with the allowance the debt token checks when it records the debt. That check subtracts the borrowed amount from the allowance the delegator stored for this delegatee (source: Aave GitHub, DebtTokenBase.sol). A request larger than the remaining allowance therefore fails at that step.
Suppose you supply $10,000 worth of ETH and approve a delegatee for 10,000 USDC on the variableDebtUSDC token. The delegatee calls borrow for 6,000 USDC with your address as onBehalfOf, and the transaction does three things at once.
| What changes | Before the borrow | After the borrow |
|---|---|---|
| USDC in the delegatee's wallet | 0 USDC | 6,000 USDC |
| Your variableDebtUSDC balance | 0 | 6,000 |
| Allowance left for the delegatee | 10,000 USDC | 4,000 USDC |
| Your supplied ETH | $10,000 worth | $10,000 worth |
Your ETH never moves during this borrow, because it stays supplied and keeps earning interest while it backs a 6,000 USDC debt that belongs to your account even though the delegatee holds the tokens. The delegatee's wallet shows no debt at all, which is why the two of you need to agree who repays before the first borrow.
One surprise at this step is a borrow that fails while an allowance still shows on the debt token. An allowance only sets the ceiling, so the borrow also needs enough of your collateral in place and has to pass the Health Factor and E-Mode checks on your account. When a delegatee reports a failed borrow, check your collateral first and the allowance second.
Who keeps liquidation risk in credit delegation
The delegator keeps the liquidation risk, because the collateral behind a delegated loan and the Health Factor that measures it both sit on the delegator's account. A borrow that would put that Health Factor below 1 fails, which stops a delegatee from using the approval to liquidate the delegator (source: Aave Docs, Credit Delegation).
Health Factor is total collateral value multiplied by the weighted average liquidation threshold, then divided by total borrow value, with any reading below 1 signaling that the position can be liquidated (source: Aave Help, Health Factor & Liquidations). With your $10,000 worth of ETH at an 80% liquidation threshold and USDC at $1, the 6,000 USDC loan gives a Health Factor of (10,000 × 0.80) / 6,000 = 1.33. If the delegatee then asks for the remaining 4,000 USDC, total debt would reach 10,000 USDC and Health Factor would fall to 8,000 / 10,000 = 0.80, so that borrow fails even though the allowance covers it.
That check applies only at the moment of borrowing, since after the loan exists Health Factor continues to move with collateral and debt values as oracle prices update and interest accrues. Any reading under 1 opens the position to liquidation (source: Aave Docs, Aave V3 Overview). If ETH falls until your collateral is worth $7,000, Health Factor drops to (7,000 × 0.80) / 6,000, or about 0.93.
At 0.93 a liquidator can repay up to all of the debt, because the cap of 50% of total debt applies only while Health Factor stays above 0.95 with collateral and debt each worth at least $2,000. The liquidator repays USDC on your behalf and receives an equal value of your ETH plus a liquidation bonus (source: Aave Help, Health Factor & Liquidations). The delegatee still holds the 6,000 USDC, and the loss of collateral is yours.
If AAVE is the collateral behind your credit line, its price sets your Health Factor, which makes what moves the AAVE price part of managing the loan. You may also want a way to trade AAVE price moves that sits apart from any Aave position, and for that BloFin lists AAVE/USDT Spot for buying and selling the token and the AAVEUSDT Perpetual, a USDT-margined contract that tracks the AAVE price.
Before you size a trade on either market, compare the maker and taker fees for your account tier on the BloFin fee schedule, because trading costs add up separately from the borrow rate on your Aave loan.
Why E-Mode categories must match
A delegated borrow must fit the delegator's E-Mode category, because the debt lands on the delegator's account and that category limits which assets the account may borrow. With the STABLECOINS category active, the delegator can borrow only assets in that category, which means a delegatee approved for WETH credit sees the borrow revert (source: Aave Docs, Credit Delegation).
Efficiency Mode (E-Mode) groups assets into categories, and each category sets its own loan-to-value ratio (LTV), liquidation threshold, liquidation bonus and borrowing permissions. While a category is active, you can borrow only the assets inside it, with the collateral parameters on your account following that category (source: Aave Help, Efficiency Mode).
| E-Mode state of the delegator | Approved debt asset | Borrow result |
|---|---|---|
| Stablecoin category active | A stablecoin in that category | Can succeed if collateral, allowance and Health Factor allow |
| Stablecoin category active | WETH, outside the category | Reverts |
| No category active | Any asset the market lets you borrow | Follows the ordinary borrow checks plus the allowance |
The rule matters most when you approve credit in several assets. A delegator with the stablecoin category switched on can approve WETH credit without any error, because the approval call only stores the amount for that delegatee (source: Aave GitHub, DebtTokenBase.sol). The failure shows up only when the delegatee tries to borrow. Matching the approval to the category first saves the delegatee a failed transaction and the gas it costs.
To check your category, open the Aave dashboard and find the E-Mode option next to your account summary. From there you can enable, switch or disable a category, which then changes the assets you may borrow and the parameters that apply to your collateral (source: Aave Help, Efficiency Mode).
Switching is a bigger decision under delegation than it looks. Because each category carries its own Aave E-Mode parameters, turning one off to allow a WETH borrow can lower the liquidation threshold behind every loan already open on your account, including the ones your delegatees took. Recalculate your Health Factor under the new category before you switch, and only then approve or raise credit in the new asset.
How to repay delegated debt and end a credit line
Anyone can repay a delegated loan on the delegator's behalf by calling repay or repayWithPermit on the Pool; the delegator can also repay with aTokens of the same asset in the same pool through repayWithATokens (source: Aave Docs, Credit Delegation). Each repayment lowers the debt and lifts the delegator's Health Factor (source: Aave Help, Health Factor & Liquidations).
| Repay function | Who can call it | What it spends |
|---|---|---|
repay | Any wallet, including the delegatee | The borrowed asset, such as USDC |
repayWithPermit | Any wallet that signs a token permit | The borrowed asset, approved by signature |
repayWithATokens | The delegator | aTokens of the same asset in the same pool |
In practice the delegatee usually repays with repay, since they hold the borrowed USDC, and names your address as the account whose debt falls. repayWithATokens is the delegator's fallback when the delegatee is slow and your Health Factor needs help, because it lets you cancel debt with supplied USDC you already hold in the pool. That only works if you supplied the same asset the delegatee borrowed.
Repayment and allowance are tracked separately, because the allowance on a debt token changes in only two ways: a new approval through approveDelegation or delegationWithSig sets it; each delegated borrow subtracts from it (source: Aave GitHub, DebtTokenBase.sol). A delegatee who borrowed 6,000 USDC of a 10,000 USDC allowance and then repaid in full still has 4,000 USDC of allowance left, and can borrow the full amount again only after you approve a new figure.
Ending a credit line therefore takes two actions: first make sure the debt reads zero on your account, then call approveDelegation with the delegatee's address and an amount of 0 on every debt token you approved. Read borrowAllowance on each token afterward to confirm the figure is 0, because an allowance you forget about lets that address open new debt on your collateral at any later time.
Credit delegation vs an ordinary Aave borrow
An ordinary Aave borrow keeps everything in one wallet: you supply, you borrow, you receive the tokens and you carry the liquidation risk. Credit delegation splits those roles between two addresses and adds an allowance on the debt token and an E-Mode match, while the pools, the prices and the liquidation rules stay the same.
| Question | Ordinary borrow | Credit delegation |
|---|---|---|
| Who supplies the collateral? | The borrower | The delegator |
| Who receives the borrowed tokens? | The borrower | The delegatee |
| Whose Health Factor moves? | The borrower's | The delegator's |
| Who faces liquidation? | The borrower | The delegator |
| What has to be in place first? | Collateral within market limits | Collateral, an allowance on the debt token and a matching E-Mode category |
Both paths rest on the same supply and borrow pools that every Aave V3 market uses, and a delegator starts with the same steps as anyone who wants to supply on Aave. The difference is who gets the tokens and who holds the risk once the debt exists.
An ordinary borrow fits when the person with the collateral is the person who needs the funds, because one wallet then sees the debt, the Health Factor and the tokens together and can react to a price drop in one place. Delegation fits when the collateral and the need for liquidity belong to different people who already have a reason to trust each other, such as two entities under one owner or a lender and a borrower with a signed agreement.
The trade-off is visibility, because under delegation the person who spends the borrowed tokens never sees a Health Factor warning on their own account, while the person who sees the warning has no control over the tokens. Agreeing on a minimum Health Factor and a repayment route before the first borrow closes that gap.
Looking to trade AAVE tokens on BloFin? To get started, you'll need to first create a BloFin account, fund your account with cryptocurrency, then open the AAVE/USDT Spot trading page or the AAVEUSDT Perpetual page.
Frequently asked questions
Does the delegatee need any collateral of their own?
The delegatee posts no collateral for a delegated loan, because the borrowing power comes entirely from the delegator's supplied assets, which gives the delegatee uncollateralized access to liquidity. The protocol enforces only the allowance and the delegator's own risk limits. Repayment, interest sharing and any penalty for default are terms the two parties set for themselves, either off-chain through a legal agreement or on-chain through a smart contract that both of them accept (source: Aave Docs, Credit Delegation).
How long does a signed delegationWithSig approval stay valid?
A signed approval stays valid until the deadline written into it, and the delegator can set that deadline to the largest possible value so the signature never expires (source: Aave GitHub, ICreditDelegationToken.sol). Each signature also includes the delegator's current nonce, a counter the debt token raises by one when the signature is used, so the same signature cannot be submitted twice (source: Aave GitHub, DebtTokenBase.sol). That counter is necessary because the EIP-712 signing standard has no replay protection of its own (source: Ethereum Improvement Proposals, EIP-712).
Can one supplier delegate credit to several wallets at once?
One supplier can approve several delegatees, because the debt token keeps a separate allowance for each address a delegator approves (source: Aave GitHub, DebtTokenBase.sol). Each delegatee can borrow only up to their own figure, yet every one of those loans lands on the same delegator account and is backed by the same collateral. The combined debt sets one shared Health Factor, so a large borrow by one delegatee can use up borrowing power the others were counting on (source: Aave Docs, Credit Delegation).
Can a delegatee liquidate the supplier's position?
Liquidation on Aave is permissionless, which means any network participant can start it once a position's Health Factor is below 1, and the delegatee is a participant like any other. A delegatee who watches the delegator's position slip after a price drop can therefore repay part of the debt and collect a liquidation bonus from the very collateral that backed their own loan (source: Aave Help, Health Factor & Liquidations). To rule that out, the delegator has to add collateral or repay before Health Factor reaches 1, since the protocol treats a liquidation call from the delegatee like any other.
Who pays the interest on a delegated Aave loan?
Interest builds up on the delegator's account, because the variable debt token that tracks a delegated loan belongs to the delegator and grows as interest accrues. The rate follows utilization of the pool: below an optimal point the borrow rate rises along a gentle first slope, and above it the rate climbs faster along a second one (source: Aave Docs, Aave V3 Overview). Whether the delegatee covers that interest is part of the terms the two parties agree, and a jump in utilization can lower the delegator's Health Factor even while prices stay flat.
Can I cancel unused credit while a delegated loan is still open?
You can set a delegatee's remaining allowance to zero on the relevant debt token while the existing loan remains open. The approval function replaces the stored allowance, so this removes permission to make another delegated borrow without repaying debt already recorded (source: Aave GitHub, DebtTokenBase.sol). Clearing that debt is a separate repayment action through the Pool. Canceling unused credit therefore limits future borrowing, while the outstanding position still needs to be repaid (source: Aave Docs, Credit Delegation).
Researched and written by the BloFin Academy editorial team with AI-assisted drafting. Primary sources include the Aave V3 documentation on credit delegation and the V3 overview, Aave Help on Health Factor and liquidations and on Efficiency Mode, the Aave Labs post on the V4 launch on Ethereum, the Aave V3 ICreditDelegationToken and DebtTokenBase contracts on GitHub, and the EIP-712 and ERC-20 standards. All facts independently verified against cited documentation current as of October 2026.
This article is for informational and educational purposes only. It is not financial, investment, trading, or legal advice. Cryptocurrency can lose value. Borrowing on Aave can lead to liquidation if the health factor drops below 1. Spot AAVE/USDT buys the token. An AAVEUSDT Perpetual is a contract on the price. Do your own research. Consider your circumstances before using any protocol or trading any asset.