LTV Ratio: It is very important to understand the LTV ratio in case of a loan, it affects your EMI and down payment..

When you take a home loan, car loan, or personal loan from a bank, the bank considers many factors. LTV i.e. Loan to Value ratio is also an important factor. The LTV ratio tells how much funding the bank will give you compared to the property, car, or asset for which you are taking the loan. It is important to understand this because it directly affects the loan approval, EMI, and down payment. Let us understand this in simple language. This is how LTV is calculated.

LTV ratio (%) = (loan amount ÷ total value of property or asset) × 100. For example, suppose you are buying a property worth ₹50 lakhs and the bank is giving you a loan of ₹35 lakhs for it, then apply the formula to calculate LTV ratio - LTV ratio (%) = (₹40 lakhs ÷ ₹50 lakhs) × 100 = 70%. This means that the bank can give you a loan of up to 70% of the loan amount, you will have to arrange for the remaining 30% yourself.

This is how it affects your down payment and EMI.

The higher the LTV ratio, the more loans you will be able to take from the bank and you will have to make less down payment for the property. But a higher loan is not good for the future. When you take a higher amount as a loan from the bank, the risk for the bank also increases, in such a situation the bank can charge you more interest on the loan. Apart from this, if the loan is more, then the down payment will have to be less but due to the higher loan amount, your EMI will increase.

On the other hand, if the LTV ratio is less, the loan will be less, and the risk for the bank will be less. In such a situation, you will have to pay more down payment but you will have to pay less EMI of the loan. At the same time, due to the lower amount, the chances of loan approval will also increase. This means LTV directly affects your down payment and EMI. In such a situation, before applying for a loan, definitely check the LTV ratio once.

What is the maximum LTV ratio for which loan

Home loan

For home loans up to ₹ 30 lakh, the LTV ratio can be up to 90%.

For loans from ₹ 30 lakh to ₹ 75 lakh, the LTV ratio can be up to 80%.
For home loans above ₹75 lakh, the LTV ratio can be up to 75%.

Car Loan

The maximum LTV ratio for a car loan is usually 80%, but some banks offer the facility up to 100%.

Gold Loan

The maximum LTV ratio for a gold loan is 75%.

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