What's the definition of loan-to-value ratio?

I've been researching car loans and I keep seeing the term loan-to-value ratio. What does this mean?

Answer
Researching the terminology of car loans is a good idea—you want to know what you’re signing up for!
A loan-to-value ratio is the amount of the loan you requested compared to the value of the car you want to buy. This rate should be 100% or less, which means the amount you want to borrow is equal to or less than the cost of the car.
Some lenders may approve loans for more than the value of the vehicle so you can use the extra funds to upgrade your car or pay off other debt. This is usually only available to borrowers with exceptional credit and high income.
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Eric Schad
Answered on Oct 26, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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