Understanding Loan-to-Value (LTV) in property P2P lending

If you invest in any form of property loan, you may be familiar with the LTV acronym. LTV stands for Loan-to-Value, and it is one of the most important concepts to get to grips with as a property investor.

What is Loan-to-Value (LTV)?

Simply put, LTV is the ratio between the amount of money being borrowed and the value of the property securing that loan.

For example, if a borrower wants to borrow £500,000 to finance a property development, and the property securing the loan is valued at £1m, the LTV would be 50%.

LTV is used by every property lender and property lending platform as a way of assessing the security behind each loan. It is particularly important when property is being used as collateral against the overall loan. If the borrower is unable to keep up with their repayment schedule and all other efforts to refinance or recover the loan have failed, the lender can make a claim the collateral and sell it in order to recoup investor capital.

It is worth noting that there is a difference between a first charge and a second charge when it comes to property collateral.

Lenders who have a first charge on a property will be first in line for repayment whenever the property has been sold. Lenders with a second charge claim will be paid second, which effectively increases the risk as there is a possibility that there may not be enough money left to pay everyone.

Loanpad always takes a first charge on every property that is taken as security against each loan alongside our lending partners with Loanpad ranking above our lending partners upon repayment. This allows us to reduce risk for our investors, by ensuring that they are first in the queue should a loan default lead to a collateral sale.

Why does LTV matter to investors?

For retail investors in property P2P lending, the LTV figure provides a snapshot of risk.

In theory, the lower the LTV, the lower the risk of capital loss. For example, if a loan has an LTV of 50%, the property would have to fall in value by 50% before investors’ capital is at risk, assuming the platform can recover the property in a default.

If a loan is offered at 80% LTV, there is less of an equity cushion if things go wrong. Even a modest fall in property prices could impact recovery values.

Essentially, the lower the LTV, the greater the buffer between the loan amount and the underlying security.

LTV in P2P lending

When reviewing any new borrower applications, property lending platforms such as Loanpad will carry out extremely thorough due diligence to ensure that every borrower is creditworthy and that the underlying collateral has value.

In order to minimise risk to our investors, we keep our LTVs very low. As of September 2025, our average LTV was just 45.04%. This means that a property would have to decline in value by more than 54.96% before our collateral is impacted. As a result of our conservative LTVs and strong due diligence process, no investor has ever made a capital loss with Loanpad to date.

LTV is one of the simplest yet most powerful indicators of risk in property-backed P2P lending. While it should never be the only factor you consider, it provides a clear benchmark for assessing how much security sits behind your investment.

As a P2P investor, it is very useful to understand and monitor LTV, alongside other factors such as borrower experience, market conditions, and platform due diligence. When you have more knowledge about a loan and its underlying risk, you can make more confident and informed investment choices.