Lending crypto on a decentralized protocol can pay a different rate every hour, and borrowing against it can cost more next week than it does today. The rates move because nobody fixes them in advance: each pool reprices itself from how much of its money is already lent out, using a formula anyone can read.
Aave runs pooled lending markets of this kind on Ethereum and other major networks. For most assets, the rate you pay or earn comes from utilization, the share of a pool's supplied liquidity that is currently borrowed, fed through a curve with two slopes and a bend at an optimal point (source: Aave Docs, Aave V3 overview).
What are Aave interest rates?
Aave interest rates are the yearly rates that borrowers pay and suppliers earn on each reserve of an Aave market, where a reserve is the pool of one asset, such as USDC, inside one market. Both rates are variable and adjust with utilization (source: Aave Docs, Aave V3 overview).
You will see the two rates written as an APY or an APR. Annual percentage yield (APY) is the return over one year including compound interest. Annual percentage rate (APR) is a simple yearly rate that ignores compounding and is the usual term for the cost of a loan (source: Investopedia, What Is APY?). On Aave, the supply figure tells you what your deposit earns, and the borrow figure tells you what your loan costs.
Each side of the market holds a token that tracks the rate. When you supply, you receive aTokens such as aUSDC, interest-bearing tokens whose balance grows as borrowers in the pool pay interest. When you borrow, variable debt tokens such as variableDebtUSDC record what you owe and grow as interest accrues (source: Aave Docs, Aave V3 overview).
Every rate belongs to one reserve in one market. USDC on Ethereum Core and USDC on a layer 2 market are separate reserves, each with its own utilization and slope settings. The rate strategy reads its slopes for each reserve separately (source: Aave Docs, Interest Rate Strategy). Before you compare two figures, confirm that both refer to the same asset in the same Aave market and network.
Those parameters are calibrated asset by asset. Aave changes them when market conditions on the protocol and across decentralized finance (DeFi) move (source: Aave, Borrow Interest Rate). A rate you wrote down last month may come from a curve that has since been retuned.
How utilization sets the borrow rate
For most assets, the Aave borrow rate is a function of utilization, which measures how much of a reserve's capital is lent out. When capital is plentiful, borrowing stays cheap to attract borrowers. When capital gets scarce, the rate rises to draw in new supply and to push existing borrowers to repay (source: Aave, Borrow Interest Rate).
The curve most assets follow has two straight segments that meet at the optimal usage ratio, a utilization level often called the kink. Up to the kink, the borrow rate equals the base rate plus the first slope scaled by how far utilization has travelled toward the kink. Past it, the rate equals the base rate plus the whole first slope plus the second slope, scaled by how far utilization has moved through the remaining range to 100%. The second slope is far steeper because liquidity risk builds quickly as utilization nears 100% (source: Aave, Borrow Interest Rate).
When Aave V3 launched, its risk framework grouped assets into three rate strategies, one for each cluster of assets with similar risk profiles.
| Strategy | Example assets | Optimal usage | Slope 1 | Slope 2 |
|---|---|---|---|---|
| Rate Strategy Volatile One | WETH, WBTC, LINK, AAVE | 45% | 4% | 300% |
| Rate Strategy Stable One | DAI | 90% | 4% | 60% |
| Rate Strategy Stable Two | USDC, USDT | 80% | 4% | 75% |
All three strategies started from a base variable borrow rate of 0, which made the first slope the only charge on a lightly used reserve (source: Aave, Borrow Interest Rate).
Volatile assets sit on the lowest kink because they are posted mostly as collateral, and liquidations need that liquidity on hand at all times. High-liquidity stablecoins such as USDC and USDT were calibrated to lower rates to encourage borrowing (source: Aave, Borrow Interest Rate). Their curve stays on the gentle first slope until 80% of the reserve is lent out.
Those were launch settings, and the live values have moved since. In August 2026, USDC and USDT on Ethereum Core held at or above their optimal utilization and priced above first-slope targets of 4.00%, which a companion update was lifting toward 4.50% (source: TokenLogic, GHO Stewards August 2026). Use the table to understand the shape of each curve, then read the current parameters on the reserve itself.
How the supply rate and reserve factor work
Suppliers earn the interest borrowers pay, minus the reserve factor, which is the share of that interest the protocol keeps for the Aave treasury. Whatever remains is distributed as yield to everyone holding aTokens for that reserve. That split keeps your supply rate below the borrow rate on the same asset (source: Aave, Borrow Interest Rate).
That gives you a working formula you can run on any reserve: supply rate ≈ borrow rate × utilization × (1 − reserve factor). Utilization appears in the formula because only the borrowed part of the pool pays interest, while every supplier in the pool shares it (source: Aave, Borrow Interest Rate).
The reserve factor is a per-asset percentage of borrower interest that goes to a collector contract in the Aave treasury. Aave calibrates it as a risk premium tied to the overall risk rating of the asset, with stablecoins at the low end and volatile assets higher. At launch the factors ran from 10% for the least risky assets to 35% for the riskiest (source: Aave, Risk Parameters). That is why a supplier never receives the full borrow rate, even at 100% utilization.
Two practical points follow from the formula. At low utilization the supply APY can look thin even when the borrow APY is reasonable, because most of the pool sits idle and earns nothing. Two reserves with the same borrow rate can also pay suppliers differently when their reserve factors differ, so compare the supply APY figures directly when you choose where to deposit.
Once you have picked a reserve, you can supply on Aave from that market's dashboard and watch your aToken balance grow at the live supply APY. Your share of the interest arrives as that balance increases over time, with no claim step for the base rate (source: Aave Docs, Aave V3 overview).
Worked examples on a USDC reserve
Running numbers through one reserve turns the curve into something you can plan around. Take a USDC reserve on the Stable Two parameters Aave set at V3 launch: an optimal usage ratio of 80%, a base rate of 0, a first slope of 4% and a second slope of 75%, with a reserve factor of 10%.
Suppose the reserve holds 1,000,000 USDC and borrowers have taken 600,000, so utilization is 60%. That is three quarters of the way to the kink, so the borrow rate is three quarters of the 4% first slope, and a 10,000 USDC loan accrues about 300 USDC of interest a year before compounding. Across the pool, borrowers pay about 18,000 USDC a year. The treasury keeps 1,800 of that, and suppliers share 16,200, which works out to about 162 USDC a year on every 10,000 USDC supplied.
Now a few large borrowers take another 300,000 USDC, and utilization jumps to 90%. The reserve is 10 points past the kink and halfway through the remaining 20, so the rate becomes the whole 4% first slope plus half of the 75% second slope. The same 10,000 USDC loan now accrues about 4,150 USDC a year before compounding, nearly fourteen times the earlier cost. A borrower who sized the position on the 60% figure is suddenly paying a rate that belongs to a stressed market.
The same jump hits suppliers from the other side. Only 100,000 USDC is still unborrowed. The amount any supplier can withdraw is capped by the liquidity borrowers have not taken (source: Aave Docs, Aave V3 overview). A supplier who wants 150,000 USDC back can withdraw 100,000 now, and the remaining 50,000 becomes available as borrowers repay or new deposits arrive. The steep second slope exists to close that gap quickly, since a rate that high pulls in fresh supply and pushes borrowers to repay (source: Aave, Borrow Interest Rate).
Turn those two cases into a rule before you borrow. Read the reserve's current utilization and its optimal usage ratio, then work out what your loan would cost at the kink and at 10 points above it. Decide in advance the utilization level at which you will repay part of the loan, and check how far your Health Factor sits above 1. Accrued interest increases your debt and lowers the Health Factor even when prices stand still. A Health Factor under 1 opens the position to liquidation (source: Aave Docs, Aave V3 overview).
GHO borrow rate on Ethereum Core
GHO, Aave's own stablecoin, is the clearest exception to the utilization curve. On the Ethereum Core market its borrow rate is static, the same at every level of utilization (source: Aave v3.4 features). The GHO Stewards set that rate (source: TokenLogic, GHO Stewards August 2026).
The Risk Stewards carry out each change the GHO Stewards decide, within their existing caps and cooldowns. A GHO Stewards update published on August 27, 2026 took the Core rate from 3.75% through 4.00% to 4.25% in two equal steps, within the stewards' existing mandate. GHO stayed priced below USDC and USDT borrowing at each step (source: TokenLogic, GHO Stewards August 2026). Because the rate is flat, a 10,000 GHO loan accrues about 425 GHO a year before compounding whether a small or a large share of the pool is borrowed, up from about 375 GHO on the same basis before the change. On the USDC reserve, the same-sized loan moved from about 300 to about 4,150 USDC a year before compounding, on utilization alone.
The supply side works differently too. Since the Aave v3.4 upgrade, GHO on Core behaves like every other listed asset except that its supply is minted directly into the pool, which means a borrow draws on GHO already sitting there. A supply cap set at 1 keeps users from supplying GHO to the reserve (source: Aave v3.4 features). On Core, a 100% reserve factor sends every unit of GHO borrow interest to the treasury (source: TokenLogic, GHO Stewards August 2026). Holding GHO on Core therefore earns you no supply APY at all.
Other markets price GHO on a curve. On Ethereum Prime, GHO follows a curve with a base rate and slopes. A change to that base rate shifts the GHO rate at every utilization level at once (source: TokenLogic, GHO Stewards August 2026). That contrast is the useful part for a borrower. On Core, GHO, Aave's native stablecoin, gives you a steadier cost than a USDC loan because its rate stays put when the pool fills, whereas a USDC loan can be cheaper at low utilization and considerably more expensive at high utilization.
Variable rates and the end of stable borrowing
Every Aave V3 borrow now accrues at a variable rate. The rate strategy returns only two values, a liquidity rate for suppliers and a variable borrow rate for borrowers (source: Aave Docs, Interest Rate Strategy). Your debt sits in variable debt tokens that grow as interest accrues (source: Aave Docs, Aave V3 overview).
Earlier versions also offered a stable rate mode, which held a borrower's rate at the level set when the loan opened until specific rebalancing conditions were met (source: Aave, Borrow Interest Rate). A critical bug report about the stable rate arrived on November 4, 2023, and new stable borrowing was halted as part of the fix. In January 2024, BGD Labs proposed fully deprecating the mode on Aave v2 and v3 by moving every remaining stable position to variable (source: Aave Governance, Stable rate deprecation).
The rate on the day you open a loan is only where your cost starts. A Stable label in an old tutorial or screenshot also describes a mode you can no longer pick on today's V3 markets. Plan for rate drift the same way you plan for price drift: keep the live borrow APY in view next to your Health Factor, and repay or add collateral when the two together eat into your margin. You borrow on Aave by supplying collateral, choosing an asset, checking the Health Factor the app projects and confirming, and from then on the variable rate is part of what you monitor.
The variable rate you now monitor on every Aave loan prices only your borrowing cost on the protocol. A view on where the AAVE token's price goes is a separate position, and no Aave borrow or supply rate prices it. If your next step is a position on AAVE's price, BloFin gives you another way to take it: AAVE/USDT Spot for buying and selling the token itself, and the AAVEUSDT Perpetual, a perpetual futures contract that tracks AAVE's price.
Trading costs on either product depend on your fee tier, so check the maker and taker rates on the BloFin fee schedule before you size an AAVE trade next to any on-chain loan.
How to check a live Aave rate before you act
A live Aave rate is the current output of one reserve's utilization and parameters, so the number to size a position on is the one shown for the reserve you are about to use. Screenshots, yield dashboards and saved notes become outdated as soon as utilization moves or governance modifies a parameter.
Work through the same steps every time you supply or borrow:
- Open the Aave app, connect your wallet, and select the network and market you intend to use.
- Open the reserve for your asset and note its utilization, supply APY and borrow APY at that moment.
- Compare utilization with that reserve's optimal usage ratio. Below the kink you are on the gentle slope, and above it small changes in borrowing move the rate sharply.
- Turn the rate into tokens: your loan size times the borrow APY gives the yearly interest, and your deposit times the supply APY gives the yearly income.
- Separate the base rate from any reward incentives that a dashboard folds into one blended figure, since rewards run on their own schedule.
- Write down the utilization level or rate at which you will repay, add collateral or withdraw, and check again after any governance update to the reserve.
Base rates are only one part of on-chain return in DeFi. Incentive tokens, smart contract risk and the time you spend managing a position all belong in the wider picture of DeFi yield for crypto investors. A rate that looks high on a dashboard is worth comparing against those costs before you commit capital to it.
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
Do Aave interest rates compound?
Aave interest compounds every second. The actual APY works out to one plus the theoretical APY divided by the number of seconds in a year, raised to that same number of seconds, minus one. The contract computes it with an approximation whose error mostly affects high interest rates. At ordinary stablecoin rates the gap between the quoted APY and a simple yearly rate is small, and it widens as rates climb, which matters most when a reserve is pushed far past its kink (source: Aave, Borrow Interest Rate).
Do flash loan fees add to the Aave supply APY?
Flash loan fees now go to the treasury. Since the Aave v3.4 upgrade, every flash loan fee is paid to the Aave treasury, in the token that was borrowed (source: Aave v3.4 features). Before v3.4, the average supply APY over a period included flash loan fees on top of borrower interest (source: Aave, Borrow Interest Rate). Older yield explanations that still list flash loans as a source of supplier income describe the earlier design. Today the interest that reaches your aToken balance comes from borrowers alone.
Why did Aave lower the optimal usage ratio on some assets?
Aave lowered the optimal usage ratio on assets affected by liquidity mining, which raised their borrowing costs, with the liquidity rewards partly offsetting that increase for borrowers. The aim is to keep Aave's borrowing costs in line with yields elsewhere. If borrowing on Aave were much cheaper than an outside opportunity, users would have an incentive to borrow the whole reserve and deploy it there, a rate arbitrage that would drain the liquidity suppliers rely on for withdrawals (source: Aave, Borrow Interest Rate).
Who can change Aave interest rate parameters?
Aave governance sets the limits, and the Risk Stewards make routine rate changes inside caps and cooldowns that governance has already approved. The August 2026 GHO borrow-rate increases, for example, went through the Risk Stewards in two staged steps. After execution, the stewards planned to track the peg, savings deposits and Core debt every week and to update the community before making another change. When a steward update like that one is announced, you can see the size and timing of each step before it reaches your reserve (source: TokenLogic, GHO Stewards August 2026).
How did Aave plan to move stable-rate loans to variable?
The January 2024 deprecation plan set out to move every remaining stable-rate loan to variable. It called for making the rate-swap function on the Aave v2 and v3 pools permissionless, so that any address, including an Aave DAO automation, could switch a remaining stable position to variable. Borrowers would pay no penalty for the switch. What they would give up was the stable exposure itself, which could help or hurt depending on how their old rate compared with the variable rate at the time (source: Aave Governance, Stable rate deprecation).
Can interest lower my Aave health factor when token prices stay the same?
Accrued interest can lower your health factor even when token prices do not move. Variable debt tokens keep adding interest to what you owe, and the health factor reflects that growing debt alongside the value of your collateral. A position becomes eligible for liquidation when its health factor falls below 1 (source: Aave Docs, Aave V3 overview). Check the debt balance as well as prices when you review a loan that has been open for a while.
Researched and written by the BloFin Academy editorial team with AI-assisted drafting. Primary sources include Aave Docs (Aave V3 overview and Interest Rate Strategy) and Aave's risk-v3 framework (Borrow Interest Rate and Risk Parameters). They also include the Aave v3.4 features document, Aave Governance posts on stable-rate deprecation and the August 2026 GHO Stewards update, and Investopedia's APY explainer. 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.