1. What is Loan To Value (LTV) Ratio?

The Loan to Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. It's commonly used in vehicle financing and real estate to assess lending risk.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• \( P \) — Loan amount (currency)
• \( Vehicle\ Value \) — Total value of the vehicle (currency)

Explanation: The equation calculates what percentage of the vehicle's value is being financed.

3. Importance of LTV Calculation

Details: Lenders use LTV to determine loan risk. Lower LTV ratios generally mean better loan terms. Most lenders prefer LTV ratios below 80% for auto loans.

4. Using the Calculator

Tips: Enter the loan amount and vehicle value in the same currency. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for a car loan?
A: Typically, lenders prefer LTV ratios below 80%. Some may go up to 120% for new cars with additional products.

Q2: How does LTV affect my loan terms?
A: Lower LTV ratios often qualify for better interest rates and terms as they represent less risk to the lender.

Q3: Can LTV be more than 100%?
A: Yes, if you're borrowing more than the vehicle's value (common when rolling negative equity into a new loan).

Q4: How is vehicle value determined?
A: Lenders typically use the lower of purchase price or current market value from valuation guides.

Q5: Does LTV include taxes and fees?
A: It depends on the lender. Some include these in the loan amount, others base LTV only on the vehicle's value.