The Loan-to-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of the collateral. Otherwise said, the measurement of the balance of the loan relative to the value of the collateral asset is represented as Loan-to-Value (LTV).

Traditional lenders (e.g. banks) use your credit score, as reported by third-party credit agencies, to determine your creditworthiness. The higher your credit score, the lower the risk for the lender. To remove the credit score form the equation you can apply for an asset-backed loan like the one offered by Nexo.

LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.

Example:

Loan amount: 5.000 USD;
Value of collateral: 10.000 USD;
Loan-to-Value = ($5.000/$10.000)*100% = 50.0%

How Loan-to-Value fluctuates and what it means for you?

As the value of the collateral goes down, the Loan-to-Value goes up. In the case of a crypto asset-backed loan, the value of Bitcoin, Ether, Litecoin, Bitcoincash, etc. is trending down.

Monitoring your account is very important during market drops. If the price of the crypto asset falls too low, the Loan-to-Value will continue to increase and the Nexo blockchain oracle will automatically request, via SMS and email, that you repay your loan or add extra collateral in your Credit Line Wallet.

Unless you do so as prompted, there is a threshold where assets from the Savings Wallet (if any) will be automatically moved to your Credit Line Wallet and if they are insufficient to cover the required Loan-to-Value, the collateralized asset will start being sold by the fully automated Nexo blockchain oracle to pay back part of the loan in order to rebalance the Loan-to-Value. This threshold at Nexo is set at 83.3%.

Before that happens you will be notified via SMS and email.

Example:

Loan amount: 5000 USD;
Value of collateral: 6 000 USD;
Loan-to-Value = ($5000/$6000)*100% = 83.3%

As a borrower, you always have the option to transfer more collateral at any time.

To summarize:

The price of crypto assets fluctuates strongly - it can move up or down. When the price moves up, the Loan-to-Value goes down. When the price moves down, the Loan-to-Value goes up.

The Nexo Loans are secured by crypto assets. But the major difference between ours and the traditional secured loans is that you retain ownership of the collateral and profit from its upside potential.

Click here to find out more about our Security and Insurance.

No, there are no prepayment, origination or instalment fees.

You can repay your outstanding balance, in part or completely, at any time and save on interest since you only pay interest for the period you borrowed.

There are no minimum amounts of repayments in fiat currencies. For minimum amounts for cryptocurrencies please click here.

There are no instalment payments. You can make repayments at any time. Interest is added to your outstanding balance daily at 00:00 CET.

Please note that if you repay a loan within 30 days of the last withdrawal, you will be charged interest for the full 30 days. Repayments will be used to cover the earliest loan withdrawals and to pay off interest before the principal.

If the value of the assets increases and the client believes that their crypto-asset has met their price target, they can place an order with the Nexo blockchain oracle to sell a fraction of the crypto assets stored in their account and repay part or all of their outstanding balance. The transaction is performed through API on some of the major exchanges (i.e. Bitstamp, Kraken, etc.) without any additional fees besides the exchange's fees.

An increase in the value of the collateral assets also allows the client to withdraw more from their Credit Line.

If the assets decrease significantly in value and you do not contribute additional assets to your Nexo account after receiving warnings from the Nexo blockchain oracle, the Nexo blockchain oracle may initiate partial automatic loan repayments to rebalance the Loan-to-Value back within limits.

The total value of your crypto assets and the minimum amount, which will trigger the small automatic loan repayments can be seen at any time below all your crypto positions on your Nexo account.

If the collateral assets decrease in value significantly, the client will be warned to add more collateral.

The client will be notified, and partial automatic loan repayments will only start after the Loan-to-Value increases to 83.3%.

Example:

If the loan amount is 5 000 USD then the partial automatic loan repayment will be initiated only when the value of your collateral decreases to less than 6 000 USD.

Loan amount: 5000 USD;
Value of collateral: 6000 USD;
Loan-to-Value = ($5000/$6000)*100% = 83.33%

The total value of your crypto assets and the minimum amount which will trigger the small automatic loan repayments can be seen at any time below of all your crypto positions in your Nexo account.

The client will receive a minimum of three notifications (via SMS and email) before that. This will happen when the Loan-to-Value increases to 71.4%, 74,1%, 76.9%. The client will be prompted to deposit more crypto assets into their Nexo account to prevent partial automatic loan repayments.

Please note that the Nexo blockchain oracle will not sell all crypto assets at once. Sell orders are executed in small increments only as much as to rebalance the Loan-to-Value back within the limits. Sell market orders are made at the market price on leading cryptocurrency exchanges. The transaction is performed through API on some of the major exchanges (i.e. Bitstamp, Kraken etc.) without any additional fees besides the exchange's fees. The funds received back from the exchange will be instantly applied towards your outstanding loan balancе.

The table below illustrates how the Loan-to-Value changes when a repayment is made - based on the percentage of sold collateral (the price of crypto assets is constant):

You can withdraw as many times as you like from your Credit Line as long as you maintain the Loan-to-Value ratio, and you have enough collateral assets in your Nexo account.

Please keep in mind that upon requesting a new loan crypto assets may be automatically transferred from Savings wallet to Credit Line wallet if there is not enough collateral in the Credit Line wallet to support the loan.

Similarly, you can make repayments at any time and, thus, increase the available loan limit in your account.