Loan Strip

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. Standing Loan

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

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

    A loan that combines two or more federal education loans into ...
  4. Classified Loan

    Any bank loan that is in danger of default. Classified loans ...
  5. Refinance

    1. When a business or person revises a payment schedule for repaying ...
  6. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
Related Articles
  1. Bonds & Fixed Income

    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. Economics

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  3. Credit & Loans

    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.
  4. Credit & Loans

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  5. Credit & Loans

    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.
  6. Credit & Loans

    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. Credit & Loans

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  8. Credit & Loans

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  9. Credit & Loans

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
  10. Credit & Loans

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
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. 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 >>
  5. What are the typical repayment terms for a syndicated loan?

    Learn more about syndicated loans and how they are structured, specifically including the typical repayment terms for a syndicated ... Read Answer >>
  6. What are the pros and cons of consolidating my student loans?

    Read about the possible advantages and disadvantages of consolidating your student loan debts, and find out how to determine ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center