Glossary term
Loan-to-Value Ratio (LTV)
Loan-to-value ratio compares the amount you borrow with the value of the asset securing the loan, shown as a percentage. A $20,000 loan on a $25,000 car is 80% LTV. Lenders use LTV to judge risk: a lower ratio usually brings easier approval and better rates, while an LTV above 100% means you owe more than the asset is worth.
Updated October 17, 2026 · Editorial Team
How Loan-to-Value Ratio (LTV) works in practice
Divide the loan balance by the asset's value and multiply by 100. For a purchase, lenders typically use the lower of the price or appraised value. Taxes, fees and add-ons rolled into a loan raise LTV, and so does carrying negative equity from a trade-in.
Finance $28,000 on a car valued at $25,000, perhaps after rolling in taxes, fees and an old balance, and LTV is $28,000 ÷ $25,000 = 112%. Putting $5,000 down on the same car to borrow $20,000 instead gives an LTV of 80%.
LTV changes over time as you pay down principal and the asset's value changes. For refinancing an auto loan or borrowing against a home, many lenders set maximum LTVs, so knowing yours helps you see whether you are likely to qualify.
Loan-to-Value Ratio (LTV): quick questions
What does an LTV over 100% mean?
You owe more than the asset is worth, also called negative equity or being upside down.
How can I lower my LTV?
Make a larger down payment, avoid rolling fees and old balances into the loan, or pay down principal faster.
Does LTV affect my interest rate?
It can. Lenders often offer better pricing at lower LTVs because their risk is smaller.
Sources
- Auto loans — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations. See our methodology.
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