> For the complete documentation index, see [llms.txt](https://docs.peapods.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.peapods.finance/net-interest-implications-lvf/apr-differential-self-lending-vs-external-lending.md).

# APR Differential: Self-Lending vs External Lending

This section compares the **same lending market** from the perspective of two different participants:

* **User A**: A borrower who self-supplies 80% of the lending pool
* **User B**: An external lender who contributes the remaining 20%

Although both interact with the same interest rate curve, their **net APR outcomes diverge significantly** due to self-lending mechanics.

**Effective APR Comparison**

| **Role**                                     | **Basis**                         | **% of Lending Pool** | **Gross APR** | **Net APR** |
| -------------------------------------------- | --------------------------------- | --------------------- | ------------- | ----------- |
| User A (Self-Lending)                        | $5,000 borrowed / $4,000 supplied | 80%                   | 50.0%         | 14.0%       |
| User B (External Lender)                     | $1,000 lent                       | 20%                   | 45.0%         | 45.0%       |
| **APR Spread** (Lender yield vs Borrow cost) | -                                 | -                     | -             | +31.0%      |

📌 *This asymmetric structure enables lenders to earn full returns while borrowers dramatically reduce their net cost—without subsidy or emissions. It creates a capital-efficient win-win that aligns incentives between both roles.*


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