> 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/interest-allocation-case-study.md).

# Interest Allocation: Case Study

To illustrate how self-lending reduces net borrowing costs, consider a standardized example involving **User A**, who borrows $5,000 at 50% APR to open an LVF position. Instead of relying entirely on external lenders, User A supplies **$4,000 of the lending pool themselves** using a flashloan-enabled self-lending loop—meaning 80% of the interest paid to lenders is redirected back to them.

### **Interest Distribution Breakdown (User A)**

| **Component**                      | **Amount**             |
| ---------------------------------- | ---------------------- |
| **Total Interest Paid**            | $2,500 (50% of $5,000) |
| Interest to Lenders (90%)          | $2,250                 |
| – Returned to User A (80% share)   | $1,800                 |
| – Paid to External Lender (User B) | $450                   |
| Protocol Fee (10%)                 | $250                   |
| **Net Interest Cost (User A)**     | **$700**               |

📌 *By supplying the majority of the lending pool, User A effectively reclaims 80% of the interest paid to lenders—lowering their **real** cost from $2,500 to just $700. This drastically improves capital efficiency without impacting lender returns or protocol revenue.*

***

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