Loans

def. Loans are the simplest way to borrow money for investment.

• Can be collateralized by another asset
• Highest seniority usually in the capital structure def. Loan To Value (LTV) is the loan principle vs collateral value:

$$\text{LTV}:=\frac{\text{loan amount}}{\text{collateral amount}}$$

¶A mortgage for a house worth $1M,with$200k down payment and $800kmortgageloanhas80AlowerLTVisbetterforthebankbecausethecollateralcanbesoldmoreeasilytoregaintheloanamount.Intheaboveexample,whenmortgagedefaults,auctioningthe$1M house will probably get you $800k.