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.

BREAKING DOWN '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. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  2. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  3. Loan Register

    A journal that chronicles the recording of time loans. The loan ...
  4. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  5. Futures Strip

    The sale or purchase of futures in sequential delivery months ...
  6. Classified Loan

    Any bank loan that is in danger of default. Classified loans ...
Related Articles
  1. Investing

    Introduction To STRIPS

    STRIPS provide an alternative form of bond for fixed-income investors who need definite cash flows at specific times. Read the article to find out how.
  2. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  3. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  4. Investing

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  5. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  6. Personal Finance

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  7. Retirement

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  8. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  9. Personal Finance

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
RELATED FAQS
  1. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  2. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  3. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
  4. Federal student loan rates: who sets them, why they vary

    Federal student loan rates are set by Congress, not by banks. Learn more about who gets what rate, and how often they get ... Read Answer >>
  5. When is it a good idea to take out a loan to invest?

    The only time it makes sense to invest a loan is when the return on investment of the loan is high and the risk level of ... Read Answer >>
Trading Center