The loan-to-value ratio, or “LTV,” is a metric Qollateral uses to determine the amount a customer can finance for a secured loan, and it works by comparing the desired loan amount against the asset's liquid wholesale value. Qollateral provides one of the most competitive LTV ratios in the nation. Understanding how this ratio works before obtaining an asset-backed loan is important because it can secure a higher-offer loan. We’ve compiled everything you need to know in this quick and easy-to-understand guide on collateral LTV ratios.
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What Is Loan To Value?
The LTV ratio is a number lenders use to compare the loan amount to the assets being used as collateral. It is integral to lending because it helps companies like Qollateral determine the risk of an asset-backed loan before it is approved. Low LTV ratio loans are considered less risky and greatly benefit the lender. However, they ultimately limit how much borrowers can loan against their valuable assets.
For example, let’s say a customer is using a $15,000 diamond engagement ring as collateral but is only approved for 65% of the appraised wholesale value of the ring from other luxury collateral lenders. The total amount they can borrow is $9,750. On the other hand, Qollateral offers the highest LTV loans in the nation at 80%, which is $12,000. This example clearly demonstrates why finding a high-offer loan from a trusted and secure lender is imperative to fund your financial needs.
The assets Qollateral accepts include but are not limited to:
Diamond Jewelry and Engagement Rings
Numismatic Coins
How To Determine LTV
The loan-to-value ratio is determined by dividing the desired loan amount by the appraised value of the collateral used as security for the loan and then multiplying that number by 100. For example, you wish to obtain an $8,000 short-term loan using a Rolex watch valued at $10,000. In that case, ($8,000 ÷ $10,000) x 100 = 80% LTV ratio.
What is a Good LTV?
What constitutes a “good” LTV will likely vary from company to company and on the type of loan you’re trying to obtain, whether it be a short-term asset-back loan from Qollateral or a home mortgage loan from your local bank. However, a general rule of thumb is that 80% is the most favorable for the borrower because it doesn’t limit their borrowing power as greatly as lower LTV ratio loans.
For example, if you need $13,000 to cover an unexpected medical expense, you would need an asset worth at least $20,000 if you aim for a 65% LTV ratio. Collateral would offer $16,000 on the same loan at 80%.
Factors That Influence Loan-to-Value Ratio
Asset value – which is determined by skilled Qollateral appraisers by considering factors such as when the asset was made, condition, rarity, materials used, demand for similar items on the secondary market, and current market conditions.
Loan amount – a percentage of the asset's liquid wholesale value.
What Types of Loans Use LTV?
LTV is helpful in many lending sectors, including home mortgages and auto loans. In those cases, the borrower usually uses capital from selling another home or a car trade-in as a down payment, which would be used to calculate the LTV.
Improving Loan-to-Value Ratio
There are many ways to improve the LTV ratio in other industries, such as making a larger down payment if you buy a home. Qollateral already provides the nation's highest LTV ratios, which equates to the highest-offer loans. However, if the borrower wanted to improve their ratio, they could either borrow less against the asset pledged as security for the loan or choose a different asset with a higher value.
At Qollateral, we believe in complete transparency and want to arm our customers with as much knowledge as possible to help them maximize the value of their assets, which includes a basic understanding of LTV and how it affects luxury collateral lending.
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