1. What is Loan-to-Value Ratio (LTV)?

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. In auto loans, it compares the amount borrowed to the actual value of the vehicle being purchased.

2. How Does the Calculator Work?

The calculator uses the LTV formula:

Where:

• Loan Amount — The total amount being borrowed
• Vehicle Value — The actual value or purchase price of the vehicle

Explanation: The LTV ratio shows what percentage of the vehicle's value is being financed. Lower LTV ratios generally mean less risk for the lender.

3. Importance of LTV Calculation

Details: LTV is crucial for determining loan terms, interest rates, and whether the borrower will need to pay for private mortgage insurance. Most lenders prefer LTV ratios of 80% or less for auto loans.

4. Using the Calculator

Tips: Enter the loan amount and vehicle value in dollars. Both values must be positive numbers. The calculator will compute the LTV percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good LTV ratio for an auto loan?
A: Generally, an LTV of 80% or lower is considered good. Some lenders may accept higher ratios but may charge higher interest rates.

Q2: How can I lower my LTV ratio?
A: You can lower your LTV by making a larger down payment, choosing a less expensive vehicle, or negotiating a better purchase price.

Q3: Does LTV affect my interest rate?
A: Yes, higher LTV ratios typically result in higher interest rates as they represent greater risk to the lender.

Q4: What's the difference between LTV and combined LTV?
A: For auto loans, LTV typically refers to the single loan amount. Combined LTV (CLTV) would include all liens against the vehicle.

Q5: Can LTV be more than 100%?
A: Yes, if you owe more on your loan than the vehicle is worth (known as being "upside-down" on your loan).