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Collateral Top-ups

Mero top-ups are a collateral management tool that borrowers can use to efficiently deposit additional collateral into a collateralized debt position. When a top-up occurs, it increases the health factor of the associated loan which in turn mitigates liquidation risk.
Top-ups are personalized to the user. Meaning, users select specific parameters that best match their desired conditions. Anyone who holds Mero LP tokens can register top-ups. Liquidity that is registered for top-ups stays in Mero pools where it continues to earn yield up until the very moment user-defined triggers are met and a top-up is executed.
Mero currently supports Aave & Compound for collateral top-ups

Example

In this example a user is borrowing $37,500 of DAI against $50,000 of ETH as collateral on Aave. This is a risky loan with a health factor of 1.066. In order to mitigate liquidation risk, the user makes the following top-up registration:
Health factor: 1.05 Single top-up: $2,500 Total top-up: $10,000.
At some point in time ETH drops in value which causes the Aave loan to become less collateralized. This negatively impacts the loan-to-value (LTV) or collateralization ratio of the loan and decreases the health factor (health factor < 1 = eligible for liquidation).
When the user's loan hits a health factor of 1.05 a Mero keeper immediately reports this to the Mero smart contract which then executes a collateral top-up. $2,500 is taken from the Mero user's liquidity (which has been earning yield) and deposited into the user's collateral. This increases the health factor of to 1.103 which prevents possible liquidation and greatly increases the safety level of the loan.
Once registered, collateral top ups are entirely automated for users and will continue to occur (if triggered) until the user unregisters their Mero liquidity or lacks sufficient funds.
This example demonstrates how the Mero protocol can be used to manage collateral precisely and mitigate liquidation risk. The user was able to borrow at a high, or risky, LTV ratio while ensuring that their loan would be sufficiently collateralized in the event that it becomes at risk. Furthermore, the user was able to realize the benefit of Mero pools and earned yield up until the very moment their funds were needed for a top-up.
For a detailed guide on creating and managing top-ups refer here