When it comes to getting approved for a car refinance loan, your car’s LTV matters.
Car (LTV) Loan-to-Value Calculator
What is a Loan-to-Value (LTV) Ratio?
The loan-to-value ratio, commonly referred to as LTV, is a comparison of your car’s value to how much you owe on the loan.
An LTV over 100% means you owe more on the loan than your vehicle is worth. This is considered negative equity. It’s also often referred to as being upside down or underwater on your loan. The higher your LTV, the harder it may be to qualify for a car refinance loan.
An LTV under 100% means that you owe less on the loan than your vehicle is worth. This is considered positive equity and is more desirable by lenders.
How to Calculate Your Loan-to-Value Ratio
Calculating your vehicle’s LTV is pretty simple.
- Figure out how much owe on your car loan. You can find this information on your monthly statement.
- Figure out the value of your car. You can find this information on Kelley Blue Book, Edmunds, and NADAguides. Most lenders will use the retail value of the car.
- Divide your loan amount by your car’s value. Try our calculator above to get your LTV.
What’s a Good LTV for a Car Refinance Loan?
While every lender will have their own guidelines for approvals, a loan-to-value ratio over 125% will make it harder to get approved for refinancing. Others will offer refinance loans to borrowers with LTVs over 125% but may require a higher credit score, lower DTI, or other condition in order to lessen the risk to the lender — because a high LTV is seen as a high risk.
Bottom line, if you can get your LTV below 125%, you’ll increase your chances of getting approved for an auto refinance loan.