> ## Documentation Index
> Fetch the complete documentation index at: https://docs.shores.finance/llms.txt
> Use this file to discover all available pages before exploring further.

# Loans

> How loans move through the protocol.

Loans are offchain legal agreements. The protocol records their effect on the vault.

```mermaid theme={null}
stateDiagram-v2
    [*] --> Underwriting
    Underwriting --> Funded: approved, lien registered
    Funded --> Current
    Current --> Repaid
    Current --> Late: missed payment
    Late --> Current: cured
    Late --> Impaired: full repayment in doubt
    Impaired --> Enforcement
    Late --> Enforcement
    Enforcement --> Recovered
    Repaid --> [*]
    Recovered --> [*]
```

## Lifecycle

1. **Funding.** Capital moves from the vault to fund the loan offchain. The vault's books record a loan in place of cash.
2. **Interest.** Interest received is shared out monthly, after fees and the reserve. See [Staking and payouts](/technical/staking-and-payouts).
3. **Repayment.** Principal returns to the vault and is lent again.
4. **Impairment and default.** See [Defaults and impairments](/depositors/defaults-and-impairments).

## Loan type

Short-term bridge loans secured by first liens on real property. See [Loan terms](/borrowers/loan-terms).

\[TBD: how loan records are reflected onchain]


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