# 2.1 Lending Lifecycle

TrustBridge facilitates decentralized microloans through programmable lending pools and on-chain collateralization.

## 1. Loan Request

Borrowers connect their wallet and select an active lending pool. They specify:

* Loan amount
* Purpose
* Duration They must lock a fixed percentage (e.g. 20%) of the loan amount in XLM as collateral.

## 2. Liquidity Allocation

Once initiated:

* 80% of lender deposits go to active liquidity.
* 20% of lender funds go to a backstop reserve (insurance against defaults).

## 3. Disbursement

After Blend verifies that:

* The borrower’s collateral is sufficient, and
* The pool is not frozen or risky,

...the stablecoin (e.g. USDC) is sent to the borrower's wallet.

## 4. Interest Accrual

Lenders earn interest based on:

* Share of liquidity
* Pool utilization
* Dynamic rate adjustment by Blend

## 5. Repayment

Borrowers must repay the loan (principal + interest) before the deadline. If successful:

* Collateral is released
* TRBT score is increased

## 6. Default Handling

If the borrower fails to repay:

* XLM collateral is liquidated
* Backstop fund covers any remaining shortfall

## 7. Risk Monitoring & Freezing

Blend Engine monitors:

* Pool health
* Defaults
* Utilization and backstop

If thresholds are breached, the pool is frozen automatically.
