📌 Introduction

When creating a lending pool on Rain.fi, one of the most important settings you’ll define is the LTV — Loan-to-Value ratio. This ratio determines how much borrowers can receive based on the value of the collateral they deposit, and it directly impacts how your pool performs, both in terms of risk and profitability.

In this guide, we’ll explain how LTV works, how it influences your lending pool, and how to think about it in relation to borrower behavior, pool performance, and the APY you offer.

👀 What Is LTV (Loan-to-Value)?

LTV (Loan-to-Value) is a percentage that defines how much a borrower can borrow relative to the value of the collateral they deposit.

LTV = (Loan Amount / Collateral Value) × 100

Example:

If a borrower deposits 1,000 USD as collateral:

• At 50% LTV, they can borrow 500 USD
• At 70% LTV, they can borrow 700 USD

The higher the LTV, the greater the borrowing power — but also the greater the potential risk if the borrower fails to repay or if the asset value drops.

🔧 Set Different LTVs per Token in Your Pool

On Rain.fi, when setting up or editing a pool, you can choose which tokens or NFTs to accept as collateral, and assign a specific LTV to each asset.

This lets you tailor your risk exposure depending on the asset characteristics (volatility, liquidity, etc.).

⚖️ What Happens When LTV Is Higher or Lower?

→ A higher LTV allows borrowers to borrow more for the same amount of collateral.

• This can lead to larger interest amounts (APR), as the borrowed amount is higher.
• It may also increase the attractiveness of your pool to borrowers looking for maximum leverage.

→ A lower LTV limits the amount borrowers can access.

• This reduces exposure for the pool in case the collateral value drops.
• It may be preferred for more volatile or illiquid assets.

📌 There is no “right” or “wrong” LTV — each level offers a different balance between borrower demand and pool risk. It’s up to you, as a lender, to decide based on your strategy and comfort.

How LTV and APY Work Together ?

This chart is not representative of real data — it’s a simplified example meant to illustrate the general relationship between higher LTV and higher potential returns.

The APY (Annual Percentage Yield) you set in your pool is the interest rate borrowers will pay annually.

When you offer a higher LTV, you’re allowing borrowers to take bigger loans — this increases the potential returns (APR in dollar terms), but also increases your exposure.
In this case, a higher APY can be justified to reflect the higher risk. Similarly, a lower LTV may be paired with a more moderate APY, as the risk is lower for the lender.

You can update both LTV and APY at any time in the My Pools section to stay aligned with your strategy or market trends.

☝️ Tips for Managing Your Pool’s LTV

• 🔁 Monitor market trends: If a token becomes more volatile, consider lowering its LTV.
• 📊 Use the Earn Page to compare your pool’s parameters with others.
• ⚙️ Adjust over time to stay competitive and aligned with borrower behavior.
• Use Lite Mode for quick adjustments or Pro Mode for advanced control over exposure, risk filters, and custom rules.

🔎 Want to go further? Check out here our full guide on How to manage pools in Lite Mode

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FAQ : https://app.rain.fi/faq

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