What is loan-to-value ratio in SAP FS-CMS - Collateral Management System?

SAP Term: loan-to-value ratio

• Component: FS-CMS

• Component Name: Collateral Management System

• Description: Measurement of the charges that collateral agreements, receivables, or prior charges place on an object used as collateral. The loan-to-value ratio is calculated seperately for the charges placed on the object by collateral agreements, receivables, and prior charges. Each of these loan-to-value ratios is calculated separately for the maximal risk and the current risk, and is displayed as an absolute value and as a relative value for each. The absolute value equals the sum of all charges on the object, the relative value is the ratio between the absolute value and the lending value of the object. &EXAMPLE& Lending value: EUR 250,000 Sum of charges on the object: EUR 150,000 Loan-to-value ratio: Absolute value: EUR 150,000 Relative value: 60%

Smart SAP Assistant

• Key Concepts: 
  The loan-to-value ratio (LTV) is a measure of the amount of a loan compared to the value of the collateral used to secure it. In the context of SAP's FS-CMS Collateral Management System, it is used to assess the risk associated with a loan and determine the amount of collateral that must be provided. 
  
  How to use it: 
  The LTV ratio is calculated by dividing the loan amount by the value of the collateral. For example, if a loan is for $100,000 and the collateral is worth $200,000, then the LTV ratio would be 50%. The higher the LTV ratio, the higher the risk associated with the loan and therefore more collateral may be required. 
  
  Tips & Tricks: 
  When calculating an LTV ratio, it is important to use an accurate estimate of the value of the collateral. This can be done by obtaining an appraisal from a qualified professional or using a reliable online tool. 
  
  Related Information: 
  The LTV ratio is just one factor that should be considered when assessing risk associated with a loan. Other factors such as credit score, income, and debt-to-income ratio should also be taken into account. Additionally, SAP's FS-CMS Collateral Management System provides additional features such as automated monitoring and reporting to help manage risk associated with loans.