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A loan that establishes consumer credit that is granted for personal use; usually unsecured and based on the borrower's integrity and ability to pay The term loan to value, or LTV, applies primarily to the mortgage banking industry. Loan to value is an equation that mortgage lenders use to assess their risk in lending a borrower money to purchase property. The loan to value equation is basically a ratio of the amount of money being borrowed to the value or purchase price of the property, whichever is less. To determine LTV of a new purchase, the purchase price or appraised value is divided by the down payment. As an example, if you were to purchase a home for Rs.100,000 and had Rs. 10,000 to apply as a down payment, the loan to value ratio would be 90%. The purpose of establishing the loan to value ratio in the purchase of a home is to protect the lender from lending more money than the property is worth. This is why the appraised value must be at least equal to the purchase price. For consumers, the loan to value ratio weighs heavily on the interest rate you will receive on the payback of the loan. The lower the LTV, the lower the interest rate you will be given. Generally for every 5% increase in loan to value above 70%, the interest rate increases by 1/8 of a percent. In addition, most lenders require private mortgage insurance premiums, or PMI, on loan to values greater than 80%. The premium for private mortgage insurance will depend on the insurance company and the lender but can be as much as 1% of the loan amount. Though the borrower will pay a higher interest rate on a 100% loan to value ratio, many lenders will offer a 100% LTV loan on a new purchase. However, a refinancing loan will generally not go to 100% loan to value. Lenders determine the loan to value on a refinance by requiring an appraisal of the property. Usually, they can check the sale prices of comparable properties within a mile to determine the value of the home, but in special circumstances, a walk-through appraisal may be necessary. The loan to value ratio of a property also determines the amount a lender will give a borrower who wishes to obtain a home equity line of credit or a second mortgage. The difference between the value of the home and the amount owed on the primary mortgage is the maximum amount that can be borrowed. When shopping for a car loan, it is important to compare many aspects of the different car loans you might be offered. You will want to compare car loan rates, terms, and read all of the fine print [pic][pic]When you compare car loans, these tips will help you keep your information straight. The best way to begin to compare auto loans is to familiarize yourself with the different types of auto loans out there. The first home type of auto loan is a loan with a fixed interest rate. This means the interest rate does not change through the life of the loan. This is the most typical type of car loan. It is important to compare auto loan rates carefully when looking at fixed auto loans because there can be fine print relating to the loans that can change the price.
Types of Auto Loans
The best way to begin to compare auto loans is to familiarize yourself with the different types of auto loans out there. The first type of auto loan is a loan with a fixed interest rate. This means the interest rate does not change through the life of the loan. This is the most typical type of car loan. It is important to compare auto loan rates carefully when looking at fixed auto loans, because there can be fine print relating to the loans that can change the price. Another type of car loan is a variable rate loan. This is the loan that has an interest rate that changes over the course of the loan. There is usually a range that is acceptable according to the terms of this type of loan. This rate could require your approval, or it could be up to the...
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