A loan application lives or dies on two numbers: the borrower’s repayment capacity and the lender’s assessed value of the security offered. Of the two, valuation is the one most borrowers misunderstand — and the one most likely to derail a sanction at the last stage.
Why valuation drives the loan decision
Banks and NBFCs cap lending against an asset at a fixed loan-to-value (LTV) ratio. If the independent valuer’s figure comes in below the borrower’s own estimate — which happens more often than not — the sanctioned amount drops proportionally, sometimes forcing a renegotiation of the entire deal structure.
Key distinction
Market value (what an asset would sell for) and distress/liquidation value (what a lender could recover in a forced sale) are different figures — lenders typically sanction against the lower of the two.
Valuation approaches lenders accept
| Approach | Best Suited For | Key Input |
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