Loan-to-value (LTV) is a risk metric that compares how much you borrow to the market value of the collateral securing the loan. In crypto lending, it is typically expressed as a percentage, calculated as loan value divided by collateral value. A lower LTV generally indicates a safer loan for the lender or protocol because there is more collateral backing each borrowed unit.
How LTV works in crypto lending
Crypto loans are often overcollateralized, meaning borrowers must deposit more value in collateral than they receive in a loan. For example, if you deposit $10,000 worth of ETH and borrow $5,000 in a stablecoin, the LTV is 50%. Centralized lenders and decentralized lending protocols use LTV to determine borrowing limits and to continuously evaluate loan health as collateral prices change.
Because collateral values can move quickly, crypto platforms commonly distinguish between a maximum LTV (the highest ratio you are allowed to borrow at) and a liquidation threshold (the point where the position becomes eligible for liquidation). If the collateral’s value falls or the loan value rises, LTV increases, making the loan riskier.
Why LTV affects interest, margin calls, and liquidation
Higher LTV positions have less safety buffer, so they are more likely to face margin calls, forced repayments, or liquidation if markets move against the borrower. In DeFi, liquidation is typically automated: when LTV crosses a protocol-defined threshold, liquidators can repay part of the debt in exchange for collateral, often at a discount. In CeFi, the lender may request additional collateral or partial repayment.
LTV matters across the crypto ecosystem because it is a simple, widely used way to quantify collateral risk, set responsible borrowing limits, and help borrowers manage leverage in volatile markets.