LTV (Loan-to-Value Ratio)
The percentage of the loan amount compared to the appraised value of the asset being purchased.
What You Need to Know
LTV is a key risk metric used by lenders to assess loan security. It's calculated as: (Loan Amount รท Asset Value) ร 100.
Example: If you borrow $80,000 to buy a $100,000 camper van, your LTV is 80%.
LTV Guidelines:
- 80% or below: Generally considered safe for most loans
- 80-90%: May require private mortgage insurance (PMI) or gap insurance
- 90%+: Higher risk, may result in higher interest rates or loan denial
Why LTV Matters:
- Lower LTV = Lower risk for lender = Better interest rates
- Higher LTV = Higher risk = Higher rates or additional insurance
- LTV affects loan approval and terms
Improving Your LTV:
- Make a larger down payment
- Choose a less expensive vehicle
- Consider a longer loan term to reduce monthly payments
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/ask-cfpb/what-is-a-loan-to-value-ratio-and-how-does-it-relate-to-my-costs-en-135/
Related Calculators & Tools
Put your knowledge into action with these interactive tools:
Home Affordability Calculator - How Much House Can You Afford?
Calculate how much home you can afford based on your income, debts, down payment, and interest rates. Get personalized affordability estimates. Free tool.
LTV Calculator (Loan-to-Value Ratio)
Calculate loan-to-value ratio for mortgages and refinancing. Check if you meet lender LTV requirements. Free LTV calculator.
Related Terms in Debt & Credit
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The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Annual Fee
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BNPL (Buy Now, Pay Later)
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Balance Transfer Fee
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