Legal Definitions - loan value

Definition: Loan value refers to the maximum amount of money that can be safely lent on property or life insurance without putting the lender at risk of losing their investment due to the borrower's inability to repay the loan. It can also refer to the amount of money an insured person can borrow against the cash value of their life insurance policy.

Example 1: A bank is considering lending money to a borrower who wants to purchase a house. The bank will assess the value of the property and determine the loan value, which is the maximum amount they can lend without risking a loss if the borrower defaults on the loan.

Example 2: An individual has a life insurance policy with a cash value of $50,000. They can borrow up to the loan value of the policy, which may be less than the cash value, without cancelling the policy. The loan value is determined by the insurance company and is based on factors such as the policy's cash value, the insured person's age, and the policy's terms and conditions.

Both examples illustrate how loan value is used to determine the maximum amount of money that can be safely lent or borrowed without putting the lender or borrower at risk. It is an important factor in determining the terms and conditions of a loan or life insurance policy.