legal
Loan-to-Value (LTV)
Loan-to-value is the ratio of a loan amount to the appraised value of the collateral securing it, expressed as a percentage.
Definition
What it means.
LTV is the primary risk metric for asset-backed lending. A $400,000 loan secured by a $500,000 piece of equipment has an 80% LTV. Lenders set maximum LTV thresholds by asset class, typically 80–100% for new equipment, 65–75% for commercial real estate, and 50–70% for used vehicles and machinery.
The lower the LTV, the more equity cushion the lender has if it needs to liquidate the asset in a default. Borrowers with strong LTV positions can often negotiate lower rates or longer terms because recovery risk is lower.
Example
$80,000 loan on a $100,000 truck = 80% LTV. If the borrower defaults and the truck is repossessed and sold for $85,000, the lender recoups the full $80,000 balance.
Now what?
Get an offer that accounts for loan-to-value (ltv).
Soft-pull credit check. Quick application. No obligation.