1. What is Loan To Value (LTV)?

The Loan To Value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased (in this case, a car). It's a key metric lenders use to assess risk before approving a car loan.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The amount you're borrowing for the car
• Car Value — The actual value or purchase price of the car

Explanation: The equation shows what percentage of the car's value is being financed. Lower LTV ratios generally mean better loan terms.

3. Importance of LTV Calculation

Details: LTV affects loan approval, interest rates, and whether you'll need to pay for private mortgage insurance. Most lenders prefer LTV ratios of 80% or less for car loans.

4. Using the Calculator

Tips: Enter the loan amount and car value in dollars. Both values must be positive numbers. The result will show the LTV percentage.

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 rolled into the loan.

Q2: How does LTV affect my interest rate?
A: Generally, lower LTV ratios qualify for better interest rates as they represent less risk to the lender.

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

Q4: Does LTV include down payment?
A: No, LTV is calculated based on the loan amount only. Your down payment affects LTV by reducing the loan amount needed.

Q5: How is car value determined?
A: For new cars, it's typically the purchase price. For used cars, lenders use valuation guides like Kelley Blue Book.