What is Loan-To-Value (LTV) Ratio?

The loan-to-value (LTV) ratio expresses the ratio of a loan to the total value of collateral — usually in the form of a percentage. In other words, the LTV is a balance of the loan when compared to the value of the collateral asset. In traditional finance, lenders assess a borrower's credit score to determine creditworthiness. In a blockchain context, the borrowing process can be executed algorithmically via a blockchain collateral transfer. This typically removes the need for a credit assessment. The LTV ratio is determined as: LTV = LA (loan amount) ÷ CA (collateral amount)