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With Anchor interest turning positive, how is the interest deducted?

From your deposit?

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When you take a loan on Anchor the borrow interest is continually added to your loan. The distribution apr is constantly paying out ANC rewards for you to claim. These things happen at the same time. The ANC rewards are not used to cancel out the borrow interest unless you claim the ANC, convert it to UST and then pay down the loan yourself.

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