Partial Repayment Issue for Loans at Minimum Borrow Threshold in LendingTerm Contract

[c4-bot-4]

Lines of code

https://github.com/volt-protocol/ethereum-credit-guild/blob/4d33abf95fee69391af0652e3cbe5e0cffa25f9f/src/loan/LendingTerm.sol#L528
https://github.com/volt-protocol/ethereum-credit-guild/blob/4d33abf95fee69391af0652e3cbe5e0cffa25f9f/src/loan/LendingTerm.sol#L529

Vulnerability details

Impact

The protocol allows partial repayments of debt on all open loans which has option to repay debt partially.
The feature of partial repayments is important because for correlated assets loan with interest building up may become insolvent. Since this issue do not allow borrowers with minimum borrow amount, to repay debt partially. Borrowers position may go underwater due to interest building up and bad debt may occur.

Proof of Code

Add the following test to the LendingTerm.t.sol

function testPartialRepaySuccessForMinBorrow() public {
        // prepare & borrow
        uint256 borrowAmount = 100e18;
        uint256 collateralAmount = 0.06e18;
        collateral.mint(address(this), collateralAmount);
        collateral.approve(address(term), collateralAmount);
        bytes32 loanId = term.borrow(borrowAmount, collateralAmount);
        assertEq(term.getLoan(loanId).collateralAmount, collateralAmount);

        // partialRepay
        vm.warp(block.timestamp + term.YEAR());
        vm.roll(block.number + 1);
        assertEq(term.getLoanDebt(loanId), 120e18);
        credit.mint(address(this), 60e18);
        credit.approve(address(term), 60e18);
        term.partialRepay(loanId, 60e18);

    }

• Test includes successful borrowing the the minimum borrow amount and trying to partially repay loan with passing all other condition checks
• The test will always revert as require( borrowAmount - issuanceDecrease > ProfitManager(refs.profitManager).minBorrow(), "LendingTerm: below min borrow" ); condition will never be passed for the loan with minimum borrow amount.
• Therefore the borrowers with nearby minimum borrowed amount will not be able to repay loan partially.

Output for testPartialRepaySuccessForMinBorrow :

Running 1 test for test/unit/loan/LendingTerm.t.sol:LendingTermUnitTest
[FAIL. Reason: revert: LendingTerm: below min borrow] testPartialRepaySuccessForMinBorrow() (gas: 486964)
Test result: FAILED. 0 passed; 1 failed; 0 skipped; finished in 61.85ms

Ran 1 test suites: 0 tests passed, 1 failed, 0 skipped (1 total tests)

Failing tests:
Encountered 1 failing test in test/unit/loan/LendingTerm.t.sol:LendingTermUnitTest
[FAIL. Reason: revert: LendingTerm: below min borrow] testPartialRepaySuccessForMinBorrow() (gas: 486964)

Encountered a total of 1 failing tests, 0 tests succeeded

Tools Used

Manual Review, Foundry

Recommended Mitigation Steps

• Implement a special case in the contract to handle loans that are near the minimum borrow threshold, allowing them to be partially repaid down to the minimum borrow.

Assessed type

Other

[c4-pre-sort]

0xSorryNotSorry marked the issue as sufficient quality report

[c4-pre-sort]

0xSorryNotSorry marked the issue as duplicate of #1182

[c4-judge]

Trumpero changed the severity to QA (Quality Assurance)

[c4-judge]

Trumpero marked the issue as grade-b

[c4-judge]

Trumpero marked the issue as grade-c