LTV or loan to value is a crucial factor that determines the loan amount eligibility. A higher LTV ratio denotes that the lender will receive a more significant amount against their property’s value and vice versa.
For instance, if a property worth Rs.1 crore attracts an LTV of 80%, one can obtain a loan up to Rs.80 lakh. Even though a higher LTV would reduce the down payment quantum, it can strain an individual’s savings or disposable income when facing a financial crunch.
Comparatively, a lower LTV would ease out the repayment structure of high-value credit borrowers like LAP. Hence, potential borrowers should analyze the LTV before initiating an application. To simplify this complex calculation, they can use a smart tool like an LTV calculator. This would help them in making an informed decision.
Calculating LTV using an online calculator
To understand the use of a loan-to-value calculator, individuals need to understand the formula first.
Loan to Value ratio = (Total amount borrowed/current property value) x 100
For instance, suppose an individual is eligible for an Rs.50 lakh loan against property where the collateral’s value stands at Rs.80 lakh. By following the formula, the ratio will be –
LTV ratio = Rs.50 lakh/ Rs.80 lakh x 100 = 63% approx.
A potential borrower can easily evaluate the LTV by following this formula. However, manual calculations carry the highest chance of errors. To avoid anything of that sort, using a software-based tool like LTV calculator would be efficient.
This tool offers precise results within seconds and helps an individual estimate the percentage of credit availability.
Following are the steps to calculate LTV with this smart calculator.
Step 1: Visit the lending institution’s website offering an LTV calculator
Step 2: Enter property type and employment-related details
Step 3: Underneath this section, fill the space with relevant information like interest rate, property value, and tenor.
Step 4: Users can find the result within seconds after data are filled.
Individuals can analyze the result and find out the credit availability. This would further help them approach a lender levying affordable interest rates on the preferred credit form. Lenders usually evaluate the LTV ratio and related factors before approving a loan application.
In this regard, maintaining a good credit score and repayment history can also streamline the process. This would also aid in receiving customized services and better terms.
For instance, some HFCs provide pre-approved offers, which make the application process quick and easy. Such offers are available on numerous financial products like loans against property and home loans. Check your pre-approved offer by sharing details of your name and phone number.
Apart from providing an exact value, an LTV calculator also extends additional benefits. Some of them are discussed below.
What are the benefits of using an LTV calculator?
Individuals can save their precious time by employing an LTV calculator. For instance, a business owner planning to avail a loan against property can quickly find the ratio and understand the loan amount available. This will help them evaluate whether the amount is sufficient to support liquidity or operational costs. In addition, this tool helps save the time of visiting lending institutions to confirm the LTV terms.
An LTV calculator is a free-to-use tool. They can calculate the LTV ratio and compare different services offered by lenders to find a suitable one. This removes the hassle of visiting financial institutions, thereby also proving cost-effective.
Most online calculators are pre-installed with data pertaining to the terms of a specific lending institution. Moreover, these calculators are mobile-friendly and easy to access.
Individuals can always rely on an LTV calculator to decide whether to initiate borrowing. They can calculate the downpayment and check their financial strength. This would aid in effective financial planning.