Definition for : Loan to value

The loan-to-Value (Ltv) ratio expresses the amount of a Debt as a percentage of the Value of the Collateral to this Debt. A high ratio of 80% for example means that the loan is a Risky one as a decrease in Value of the Collateral of only 20% reduce the Value of the Collateral below the amount owed to lenders. Ltv are usuallly computed for mortgages and to loans to finance the purchase of listed securities or commodities like oil. If the Ltv gets too close to 100% because of a decrease in the Value of the Collateral, the borrower may be asked to provide more Collateral or Risk the Collateral being sold to repay the loan before its term.
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