Credit
Loan-to-Value Ratio
The loan amount divided by the asset's value, used in mortgage underwriting.
In more detail
Loan-to-Value Ratio is one of the foundational terms in credit. Understanding it clearly helps you read financial documents, compare products, and avoid the kind of small misunderstandings that compound into expensive mistakes.
An example
Imagine you are evaluating a typical financial product where this concept appears. Knowing exactly what loan-to-value ratio means lets you ask the right follow-up questions, compare two options on an even footing, and choose what is best for your circumstances rather than what sounds best in marketing copy.
Related terms
- APR (Annual Percentage Rate) — The yearly cost of borrowing, including interest and most fees, expressed as a percentage.
- Credit Score — A three-digit number that summarises how reliably you have repaid borrowed money.
- Principal — The original amount of money borrowed or invested, before interest is added.
- Cosigner — A person who agrees to repay a loan if the primary borrower defaults.
Definitions are general and educational. Specific products and laws vary by country and provider — confirm with the issuer before making decisions.