# Collateral fees In addition to interest payments, borrowers may also pay a variable yearly fee depending on which collaterals they have deposited. This fee is denominated in the each collateral token. This mechanism allows for efficient pricing of collateral risk. For some highly liquid collaterals such as ETH, borrowers may not pay any collateral fees because the collateral risk of ETH is determined to be relatively low. However, for less liquid collaterals or collaterals that are priced by inferior price feeds, borrowers may be charged a higher collateral fee where their collateral balance decreases over time. This fee is charged in exchange for the protocol’s exposure to the user’s collateral regardless of the user’s debt. The user may be charged additional interest based on the amount of tokens that they borrow. All debt interest and collateral fees are accrued to the Reserve contract which backs each GTR token in circulation using its asset reserves. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.grace.loans/grace/collateral-fees.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.