The Loan-to-Value (LTV) ratio is an important metric that helps determine the amount of credit you can secure using your crypto as collateral. This ratio is calculated by dividing the amount of credit you have borrowed by the value of your collateral, expressed as a percentage.
For instance, if you borrow $100 worth of USDC and the value of your BTC collateral is $1000, your LTV will be 10% (100 / 1000 = 10%).
Monitoring your LTV
It is crucial to keep an eye on your LTV, which can be monitored in real-time within the Wirex app under the ‘Wirex Credit’ tab. If you find that your LTV is getting too high (for example, approaching 70%), you can add more collateral to your existing credit line to bring the LTV back to a healthy level.
Loan limits
When opening a new line of Wirex Credit, you should pay attention to the maximum amount of credit you can secure. It is essential to stay aware of the current market rates, as the LTV can change over time. If the LTV reaches certain limit, your collateral will be liquidated, and the credit line closed.
For example, you create a Credit line using LTC as a collateral and receive NXUSD as a loan. The app prompts you to set the LTV level convenient for you. The loan health line shows the safest and the riskiest possible LTV (in this particular case the liquidation LTV should be 60%). If you choose LTV close to the orange/red zone, you should be more attentive to the currency pair rate fluctuation because if the collateral rate drops and LTV reaches the red zone, the credit line will be closed and collateral fully taken.
Please check your LTV in the Credit line details (on the loan health line) and/or in the following article because the LTV can be different for different currency pairs.
Flexible repayment options
Wirex Credit offers complete flexibility, allowing you to repay the borrowed amount in full at any time or add more collateral to reduce the LTV. There is no need for fixed monthly repayments. Whenever you are ready, you can repay the outstanding balance, which consists of the capital borrowed and any interest accrued.
In conclusion, understanding the LTV ratio and monitoring it regularly can help you get the most out of your Wirex Credit line while keeping your collateral safe.