Word of the day | Loan-to-Value (LTV)

LTV

Loan-to-Value (LTV) is a financial term used to describe the ratio of a loan to the value of an asset used as collateral, expressed as a percentage.

Think of LTV like a gauge for how risky a loan is. It basically tells you how much of the value of something you're borrowing against. For example, if you're borrowing money to buy a house, the house is the collateral. A high LTV means you borrowed a big chunk of the house's value, which can be riskier.

When using digital assets as collateral the LTV is calculated as the loan amount’d value divided by the value of the collateral , expressed as a percentage.

So a LTV at 50% you would need a value of 1000 as collateral if you would like to borrow 500.

(5,000/10,000) x 100 = 50%


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