The Loan-To-Value (LTV) ratio represents the relationship between the loan amount and the value of the collateral used to secure the loan. At Ledn, loans are issued in either US Dollars (USD) or USD Coin (USDC) and are generally set at an initial LTV of 50%.
This means that the funds you borrow are equivalent to 50% of the value of your digital asset collateral. For example, if your collateral is valued at $10,000, you can borrow $5,000.
The LTV is an important factor in managing your loan, as it determines the health of your collateral in relation to market fluctuations.
What Happens if the LTV Increases?
If your LTV increases, it means that the value of your collateral has decreased in relation to the outstanding loan outstanding balance. In such cases, you will be required to take action to avoid potential liquidation.
To prevent liquidation, you can:
- Add more collateral to your loan.
- Make a partial repayment to lower the loan outstanding balance.
If your loan reaches specific LTV thresholds, you will receive email notifications prompting you to take action:
- At 70% LTV, you will receive an initial alert to add collateral.
- At 75% LTV, a follow-up reminder will be sent.
- At 80% LTV, an automatic liquidation of your collateral will occur to repay the loan outstanding balance.
For more details on how to manage an increasing LTV, please refer to our Help Center article:
What Happens If the BTC or ETH Value Significantly Decreases?
What Happens if the LTV Decreases?
If your LTV decreases, it means that the value of your collateral has increased in relation to your loan outstanding balance. In this case, you may be eligible to redeem a portion of your collateral, provided that certain conditions are met.
Collateral can be redeemed as long as your loan maintains an LTV that meets Ledn's requirements for a healthy loan status. This process ensures that you can access your assets while keeping your loan secure.
For more information on how to redeem excess collateral, please visit our Help Center article:
How to Redeem Excess Collateral
Stay Informed and Manage Your Loan Effectively
To ensure your loan remains in good standing, we recommend regularly monitoring your LTV in your Ledn account. If you have any questions or need assistance, our support team is always available to help.