Loan to Value – LTV
The phrase ‘loan to value’ is used in the secured loans financial sector. Suppose you completely own a house yourself worth £100,000 and you want to secure a loan on the property itself. The ‘value’ as we have said is £100,000. The amount of loan you will be offered can vary wildly depending on your credit rating. If you have an extraordinarily excellent credit rating then you could manage to get a loan to value ratio of 125%, or £125,000. Obviously, a company will only offer you a higher loan to value ratio than the property you are securing the loan on if they feel there is practically zero chance of you defaulting, and you have never put a foot wrong in the past. However the average person might be able to get a loan to value ratio of 90%, allowing you to borrow £90,000. A pretty patchy record would probably get you a loan to value ratio of 70%. It’s still not much of a risk on their part because they can always cash in on your property. Anyway, the point is that the loan to value ratio you are offered is dependent on your credit rating.
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