Loan-to-Value (LTV) ratio represents the risk category that a particular loan can have. LTV ratio is calculated by taking the borrowed amount and dividing it by the value of the collateral.
Higher LTV ratio shows that the loan is more risky to the lender as the borrowed amount is a larger portion of the collateral that the borrower has deposited. This means that in the case of a liquidation event, the lender will have to sell more of the collateral to cover the borrowed amount.
Lower LTV ratio shows that the loan is less risky to the lender as there is a more than sufficient amount of collateral to cover the borrowed capital in the case of a liquidation event.
As cryptocurrency prices are always fluctuating, LTV ratios of Borrow loans on the Lendingblock platform will also change throughout the duration of the loan.
It is important for the borrower to ensure that the LTV ratio does not exceed the specified percentage (noted in the loan dashboard) as too high of a LTV ratio can lead to margin calls and liquidation of collateral.