The collateral coverage ratio is a financial metric that lenders use to assess the risk associated with providing a loan to a borrower. It measures the value of the collateral against the loan amount. A high collateral coverage ratio leads to better loan terms and rates, while a low collateral coverage ratio could cause issues with approval. Lenders calculate this ratio to evaluate the borrower's ability to repay the loan in case of default. By analyzing this ratio, lenders can determine the level of protection they have if the borrower fails to make payments. Financial institutions may also use the collateral coverage ratio to set maximum loan limits. The post What is the Collateral Coverage Ratio & Formula? – The Essential Guide appeared first on United Capital Source.

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