It’s a common thing in asset-backed lending to secure your loan with higher-value collateral (overcollateralization). Overcollateralization is often used by lenders to secure loans and reduce credit risks.
What is LTV
A ratio between the amount of your loan and the market value of your collateral is a Loan-to-Value ratio (LTV).
On CoinLoan, a borrower can set up an LTV ratio in the range from 20% to 70%. Lower LTV means you have a safety bag. In case of a market fall, your crypto will not likely be liquidated to secure a lender’s investment. Higher LTV means that you will have to act fast in case of an extraordinary market situation.
How LTV is calculated
The LTV formula is:
LTV = Loan Amount / Collateral Value
If you want to count the amount of crypto you can borrow against your crypto, you should reverse the formula:
(Loan Amount) = LTV * (Collateral Value)
What LTV means for a user
We offer LTV from 20 to 70%, meaning you can only get a loan that equals 20 to 70% of the collateral. Whatever LTV you choose, that’s the percentage of your collateral you’re allowed to borrow.
Check our Loans calculator to see how much you can borrow.
For instance, you have 2 BTC and want to make it collateral for your loan in USDT. If 1 BTC = $50,000, and you have $100,000 in total, you can only borrow 70% of that amount, meaning you will get 70,000 USDT at max. If you choose a 70% LTV, your loan amount is 70,000. If your LTV is 20%, then it’s 20,000.
How LTV works on CoinLoan
On our platform, there are three LTV statuses:
Safe (LTV under 70%): you don’t have to worry; your collateral is safe.
Liquidation Risk (70–90%): we will send you notifications about your LTV via email and mobile app, encouraging you to take some action.
Under Liquidation (LTV higher than 90%): your collateral is in the liquidation process. To prevent this, please pay attention to your LTV status and the platform notifications about its changes.