Loan Strip

AAA

DEFINITION of 'Loan Strip'

A type of commercial loan sale whereby funding for a long-term loan is acquired from other lenders. A loan strip is a share of a long-term loan (such as a five-year loan), in which the loan-strip holder receives the agreed-upon amount at maturity. The maturity is usually short-term (often 30 or 60 days). Under certain circumstances, these strips may be classified as borrowed amounts.

INVESTOPEDIA EXPLAINS 'Loan Strip'

Regulators in the banking industry will classify a loan strip as a borrowed amount if the initial investor decides not to renew the loan and cannot be replaced by another. When this happens, the strips are then classified as deposits and become subject to the reserve requirements as set forth by the Federal Reserve.

RELATED TERMS
  1. Credit

    1. A contractual agreement in which a borrower receives something ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Reserve Requirements

    Requirements regarding the amount of funds that banks must hold ...
  5. Co-borrower

    Any additional borrower(s) whose name(s) appear on loan documents ...
  6. Straight Credit

    A type of letter of credit. A straight credit can only be paid ...
Related Articles
  1. Promissory Notes: Not Your Average IOU
    Personal Finance

    Promissory Notes: Not Your Average IOU

  2. Payday Loans Don't Pay
    Options & Futures

    Payday Loans Don't Pay

  3. Different Needs, Different Loans
    Options & Futures

    Different Needs, Different Loans

  4. An Investor's Guide To Bank Stress-Testing
    Investing Basics

    An Investor's Guide To Bank Stress-Testing

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center