What is 'loan-to-value ratio' in SAP FS-BA-PM-CR - Credit Risk?

loan-to-value ratio - Overview

• Component: FS-BA-PM-CR

• Component Name: Credit Risk

• Description: The outstanding amount of a loan divided by the original value of the property securing the loan.

loan-to-value ratio - Details

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  Key Concepts: 
  The loan-to-value (LTV) ratio is a measure of the amount of a loan compared to the value of the asset being purchased with the loan. It is used to assess the risk of a loan and is calculated by dividing the loan amount by the value of the asset. In SAP FS-BA-PM-CR Credit Risk Management, this ratio is used to determine the creditworthiness of a customer and to set credit limits. 
  
  How to use it: 
  In SAP FS-BA-PM-CR Credit Risk Management, the LTV ratio is used to assess the risk of a loan and set credit limits. The system calculates the LTV ratio by dividing the loan amount by the value of the asset. The higher the LTV ratio, the higher the risk associated with the loan. The system then uses this information to determine whether or not to grant a loan and set credit limits accordingly. 
  
  Tips & Tricks: 
  When calculating an LTV ratio, it is important to use accurate values for both the loan amount and the value of the asset. This will ensure that an accurate assessment of risk can be made and that appropriate credit limits can be set. 
  
  Related Information: 
  The LTV ratio is just one factor that is used in assessing creditworthiness and setting credit limits in SAP FS-BA-PM-CR Credit Risk Management. Other factors such as customer