Yields & Returns
LTV
Loan-to-Value Ratio
Debt value divided by collateral value
Definition
Loan-to-value is debt value divided by collateral value. A position’s current LTV is distinct from the protocol’s maximum LTV for opening or expanding a loan, and from the liquidation threshold.
Example
A $1,000 debt against $2,000 collateral has 50% LTV. If collateral falls to $1,500, LTV rises to 66.67%; with a hypothetical 75% liquidation threshold, liquidation begins below $1,333.33, ignoring interest.
How it works
The protocol values debt and collateral using its oracles. Initial borrowing limits leave a buffer before the liquidation threshold; spending the entire permitted amount consumes part of that buffer immediately.
Risks to Consider
- Interest raises LTV even if collateral prices do not move
- Correlated collateral can still depeg against the debt asset
- A governance change can reduce permitted borrowing capacity
Common Questions
Is LTV the same as health factor?
No. LTV is debt/collateral. With one collateral asset, health factor equals its liquidation threshold divided by current LTV; below 1 the position is liquidatable.