Loan-To-Value (LTV) Ratio

The loan-to-value (LTV) ratio represents the proportion of a loan in relation to the total value of collateral, typically expressed as a percentage. In traditional finance, lenders assess a borrower’s creditworthiness based on their credit score. In a blockchain context, the borrowing process can be algorithmically executed through blockchain collateral transfers, eliminating the need for a credit assessment. The LTV ratio is calculated as follows:

LTV = Loan Amount (LA) ÷ Collateral Amount (CA)