The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of the corresponding collateral. Otherwise said, the measurement of the balance of the loan relative to the value of the collateral asset is represented as Loan-to-Value (LTV).
Traditional lenders (e.g. banks) use your credit score, as reported by third-party credit agencies, to determine your creditworthiness. The higher your credit score, the lower the risk for the lender. To remove the credit score from the equation, you can apply for an asset-backed loan like the one offered by Quantia.
LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.
Example
Loan amount: 5.000 USDT
Collateral: 10.000 USDT
LTV (%) = (5.000 USDT / 10.000 USDT) * 100 % = 50,0 %
As the value of the collateral goes down, the Loan-to-Value goes up. In the case of a crypto asset-backed loan, the value of Bitcoin, Ethereum, is trending down.
Monitoring your account is very important during market drops. If the price of the crypto asset falls too low, the Loan-to-Value will continue to increase, and Quantia may automatically request, via email, that you repay your loan or add extra collateral to your credit line.
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