Self-liquidation is a DeFi technique in which a borrower proactively closes their own under-collateralised or at-risk lending position — often using a flash loan to repay debt and withdraw collateral atomically — rather than waiting for a third-party liquidator to seize it at a penalty. It lets borrowers capture the collateral value that would otherwise be lost to liquidation fees. It is used on lending protocols such as Aave where liquidation penalties make self-initiated closure economically preferable.