Lending Percentage

The maximum amount of money that the bank will be willing to lend in a loan as a percentage of total collateral. This is calculated as:

$$\text{Lending Percentage}=\frac{\text{Loan Amount}}{\text{Total Collateral}}\times 100\%$$

For example, if a borrower offers collateral worth $200,000andthebankagreestolend$150,000, the lending percentage would be:

$$\text{Lending Percentage}=\frac{150,000}{200,000}\times 100\%=75\%$$