Loan-to-value (LTV)
Also called Loan-to-value ratio
How much a lender will lend as a share of the value of what you pledge, such as gold or a house.
Loan-to-value is the gap between what you pledge and what you can borrow. A lender never lends the full value, because prices move and the security has to cover the loan, plus interest, if things go wrong.
See how it works on gold in Gold loans: the real cost, and RBI’s new rules.
Questions people ask
What is LTV in a gold loan?
It is the loan as a share of your gold's value. RBI caps it at 85% for loans up to 2.5 lakh rupees, 80% for loans above 2.5 lakh up to 5 lakh, and 75% above 5 lakh. The lender must keep within the cap for the whole loan.
Why is a lower LTV safer?
A lower LTV leaves a cushion between what you owe and what the gold is worth. Lenders must keep a gold loan within the cap for its whole life, so a loan far below the limit is less likely to be pushed over it by a fall in gold prices.
One money lesson, in your inbox
A short, plain money lesson built from real news. Free. Unsubscribe anytime.
We will never spam you or sell your details. How we handle your email