Home Add to Favorite Contact Submit  
             06 December, 2023

Category:  Articles » Automotive


A Novice Guide to Understanding Car Loan to Value Ratio

         Views: 2388
2015-11-30 06:53:34     
Article by Bryce Automotive

Ever wondered how financial institutions like banks come up with the amount they lend to individuals who are applying for an auto loan?

These financial institutions look into many different factors to evaluate risks. Credit History and Credit Scores are some of the widely known and familiar factors, as well as a person’s current debt and income. These financial institutions look and weigh in these factors in a different way for one another.

One factor that is frequently and usually overlooked until the very last minute is the individual’s actual worth itself.
Understanding a little business term called Loan to Value will aid anyone to understand how financial institutions make a decision on the value an individual can loan to procure the asset – a vehicle, in this case.

The fast-paced world of the automotive industry, a Loan to Value or in this instance, a Car Loan to Value is the risk factor that all financial institutions evaluate upon deciding and determining to whether or not approve a Car Loan. The loan itself is the amount that a financial institution is prepared to lend you, and the value is related to how much the asset in question, which the loan is supposed to use, is worth.

A financial institution’s LTV percentage is what determines the actual amount that it will typically allow to finance an individual applying for a car loan. There are a number of financial institutions that allow car loans up to 100% of the car’s current market value, while other allow a lower amount, requiring in most cases, the need of a down payment for the vehicle.

This is because from a financial institution’s point of view, a loan is considered as an active investment in your desired asset. The probability of a financial institution losing money on its investment actually increases as the value of the asset goes down and decreases. This is the reason why having a high LTV ratio is regarded a high risk for most financial institutions.

The formula financial institutions use to compute and evaluate the Loan to Value is as follows: the equivalent of the amount of money financed for the car loan that is divided by the current market value of the vehicle. The Loan to Value is usually the invoice price amount for brand new cars. And the trade of wholesale value is used for Pre-owned cars, this is done in order to establish the vehicle’s value as well as not to exaggerate the expected sale or exchange value for the vehicle.

Having a lesser Car Loan to Value Ratio means the car is worth is greater that the financed amount. Typically, having a lower LTV ratio, the greater the appeal it has to a financial institution, like a lender, bank, or a credit union. Many financial Institutions have set LTV limits, which is why ensuring that the LTV is calculated is important for any individual eyeing to purchase a vehicle, may it be brand new or pre-owned.

Please take into mind that LTV is just one of the major factors during evaluating the risk of whether or not to approve an individual’s loan application. It is best to do a bit of research to get your money’s worth.

Specialized in: Cars - Autoloans - Autolenders - Financing - Canada
URL: http://www.sudburyautoloans.ca/
Print article      Bookmark this page
Related Articles 
What to Expect From Trucking Insurance Company (Popularity: ): There is nothing pleasing, in insurance coverage, like engaging a company that settles its claims within the shortest time possible. There are quite a number of companies that offer heavenly promises but they cannot deliver such. Referrals from the previous clients can help you land a good company. The feedback that you receive has to be genuine. You can also ask your kith and kin to inform you on reliable ...
Choosing the Right Highland Park Collision Repair (Popularity: ): It is nothing that you want to think about, but every time you are on the road, it is a very real possibility. You could be in a collision. It does not matter whose fault it is either. Your vehicle could be damaged in that collision and you will, of course, want to ensure that you get the vehicle repaired in the best possible manner so that you can avoid ...
Benefits of using tractors in modern farming and agriculture (Popularity: ): A tractor is a farming vehicle traditionally used to mechanise agricultural tasks such as tillage. However, the tractor has come a long way since its humble beginning as a steam engine on wheels during the early 19th century. Today, tractors are used for ploughing, tilling and planting fields. Modern tractors can be used for a variety of tasks including routine lawn care, landscape maintenance, moving or spreading fertiliser and clearing ...
Metal Fabrication Welding is Integral to Manufacturing Processes (Popularity: ): Look around you and it is hard not to find a product that has been subjected to metal fabrication welding. Often, as you drive around your locality, you will surely find at least one shop that undertakes such type of welding work. What this points to is that this kind of welding is becoming an important industry by itself and has a global presence. From small functional parts to heavy-duty ...
Automotive Metric Fasteners for the Pivotal Automobile Industry (Popularity: ): Metric fasteners are those fastening tools which adhere to the specifications of international standards as agreed upon when the International Organization for Standardization was set up in 1947. These fasteners come in a wide range of metals like steel, stainless steel, brass, nylon and titanium. So, what consists of metric fasteners? They include sockets, bolts, screws, and nuts that are necessary for affixing your valuables for a risk-free work operation. ...

Related Business 
Car Loans Toronto (Popularity: ): A car loan is simply a way for you to go about paying for the car that you are looking to purchase. You are going to take out a car loan from a financial lending company and bring it to the car dealership with you.
Your Loan Guide (Popularity: ): The major comprehensive guide to only one theme that is loans, get here all the ranks and rates of banks and lenders, get you loan quick even with a bad credit easy. Through a survey, it was found out that more than 65 percent of the American population preferred car loans to paying all the finances in one go.
Compare Car Insurance Interest Rates Online (Popularity: ): The car insurance offers the protection against theft, fire and accident of the car. If you have taken the car loan to buy a car then the loan provider will ask you to have the insurance for all these damages to the car. The third party liability is also the minimum cover that is required as per the motor law.
Car Loan City Online: Easy Car Finance (Popularity: ): At Car Loan City Online, our range of personal loan option lenders allows you to buy the car you want regardless of the security asset you have in mind or you can afford. Our after-hour’s team are dedicated to getting your finance done in your time and get the best deal for you.
Loan Credit and Mortgage Guide (Popularity: ): Know what it takes to get your loan funded and how to build or repair your credit Free. Whether a business, home mortgage, auto or personal loan. The less you know the more it could cost you! Understanding your credit and knowing what lenders look for, will help you in obtaining financing. You don't have to be an expert in financing to get a good deal; you just need to ...
Car Loan Guidance (Popularity: ): Auto loan and car loan - find auto loan rates, car loan rates calculators, and expert auto loan advice to help you find the best auto loan rate for you
UK Financials Ltd. (Popularity: ): UK Financials Ltd is your one stop shop for all your loan needs. Whether you are looking for a loan to buy a car, for a loan for home improvement,loan for consolidate your debts or pay off your bills, we can help you. Regardless of your bad credit history, we can search all the available loan lenders and companines to find the one who can give you the loan.
Car Loan (Popularity: ): 123 Car Finance for the Best Car Finance Loans including Guaranteed, Bad Credit, Poor Credit, Cheap, New, Used, Low Rate, Subprime & Instant Car Loans to Compare Car Loans with Car Credit, Car Loan Rates & Quotes with our Car Finance Calculator.
Loan - Loan Philippines - Car Loans (Popularity: ): Raining Pesos is the Philippines’ pioneer and leading online loan facilitator. Teamed up with Philippines’ local and global banks, it offers Home/Housing, Car/Auto, OFW, Personal, and Business Loans. Your choice for fast and simplest loan purpose.
Auto Loan |Car Loan |Auto Financing |Car Credit (Popularity: ): Car Credit .com can get you approved for an auto loan with bad credit. Specializing in auto financing, we are a nationwide car loan service. Get car credit today.