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 ÷ Asset Value) × 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:
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.
Mortgage Calculator
Calculate monthly mortgage payment, total interest, and complete cost of homeownership with amortization
Related Terms in Debt & Credit
APR (Annual Percentage Rate)
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
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.