LTV stands for loan-to-value ratio and refers to an important set of numbers when financing your new vehicle or refinancing an existing loan. You calculate your LTV by dividing the amount of money you’re borrowing by the actual value of the car. Lenders like this number as low as possible to negate some of their risk in the lending process. An LTV ratio over 100% means that you owe more on your vehicle than what it’s worth, also known as negative equity. An auto loan is a secured loan. This means that you’re using the vehicle as collateral in case you default on the loan. If this happens, the lender can repossess the vehicle and sell it to recoup its losses. If you owe more money than what the vehicle is worth, the lender will not be able to get all of its investment back. If that happens, you’ll lose the car and still be responsible for the remainder of the money owed. Lenders know that they rarely receive that money from the borrower and instead have to sell the debt to a collection agency for pennies on the dollar. That’s why lenders will only consider a loan application if the LTV ratio is in their favor.