The Vibe: The percentage showing how much you’ve borrowed compared to your collateral — higher LTV means higher liquidation risk.
The Details: LTV is the ratio of your loan amount to the value of your deposited collateral. Formula: LTV = (Loan Amount ÷ Collateral Value) × 100%. Example: Borrow $5,000 against $10,000 ETH collateral = 50% LTV. Platforms set max LTV limits (e.g., 75% on Aave) and liquidation thresholds (e.g., 80–85%). If LTV rises above the threshold (due to collateral price drop or interest accrual), your position gets liquidated. Lower LTV = safer (more buffer against drops). In 2026, LTV monitoring is key in DeFi lending (Aave, Compound) and margin trading (Binance, Bybit).
Pro Tip: Keep LTV under 50–60% for safety — add more collateral or repay part of the loan if it climbs. Use stablecoin collateral (USDC) for lower volatility. Always watch LTV in real-time on platform dashboards — small price drops can spike it fast.