Loan-To-Value (LTV)

2020-03-13 01:01
What is Loan-To-Value (LTV)?
The loan-to-value (LTV) ratio is a measure to evaluate lending risk. The ratio measures the notional value of a loan against the market value of its collateral. For instance, a high LTV ratio represents a high financial risk.
How to Calculate LTV?
LTV = Loan Amount / Collateral Amount x 100%
*Loan Amount = Principal + Interests
Example: 1 BTC is equivalent to 7,400 USD on 2020/03/12 9:00 AM UTC, thus 0.01938571 BTC is equal to 143.45 USDT
LTV (%) = 100 USDT / 0.01938571 BTC x 100%
= 100 USDT / 143.45 USDT x 100%
= 69.71%
LTV and Liquidation
Binance uses the LTV ratio to evaluate the risk level of your cross collaterals. Your collateralized assets will face liquidation if the LTV ratio reaches a certain threshold. If there are still assets remaining after the liquidation, it will be returned to the spot account as the original asset type.
When the LTV ratio reaches the Margin Call level, you will receive a margin call notification via email, inmail and SMS, prompting you to add collateral to reduce the risk of liquidation. When the LTV ratio reaches the Liquidation Call level, it triggers a forced liquidation on your collateralized assets. After this, a liquidation call notification via email, inmail and SMS will be sent out to notify you.
Collateral AssetsInitial LTVMargin callLiquidation Call
Upon liquidation, a liquidation fee will be imposed, this fee is calculated based on 1 % of the loan amount. Please note that the liquidation fee on collateral here is different from the liquidation fee of your position in futures. During extreme price movements, you might be charged both liquidation fees on collaterals and your position in futures at the same time. Please refer here for the liquidation fee imposed on your position in futures.
Risk Warning: Binance uses commercially reasonable effort to send margin call notification to the users if the LTV ratio falls below a certain threshold. There may be instances where the users fail to receive the notification on time due to network delay, computer system failures and other force majeure. Binance will not be liable for any loss that might arise from your use of this feature. Please use at your own discretion and risk.
How to Prevent Liquidation
You can always adjust the LTV ratio to avoid the liquidation of collaterals.
1. Go to “Collaterals” and click “Adjust LTV”.
2. Choose “Add” if you would like to lower your LTV ratio. A lower LTV ratio represents a lower risk. Fill in the amount of collateral you would like to top up. New LTV ratio will be shown. Click “Add Collateral” once you have confirmed.
3. Your LTV ratio is lowered to 32.73% as you have added more collateral to your account.
4. You may remove some collateral amount out of your account by choosing “Remove”. Fill in the amount you would like to remove. Click “Remove Collateral” once you have confirmed.
5. Now, the latest LTV ratio is increased to 44.21% after removing the collateral amount of your account. Please monitor your LTV ratio level proactively to avoid the liquidation of collateral during extreme price movement.