What is the Full Form of LIP in Banking?
The Full Form of LIP in Banking is Loan-In-Process Account (LIP). LIP serves as a special deposit account, used for construction financing. It retains the buyer’s down payment and applies it to the early draws of construction. The expenditure of the actual loan will only be made after the buyer’s money has been spent.
Monthly interest charges will be charged to the amount that has been drawn against the loan. Upon completion of the home, the buyer will be required to provide a homeowner’s insurance policy and funds to close the escrow account. After the final payments are made to the builder, the buyer will begin making monthly payments based on paying off of the remaining balance at that time.
Significance of LIP:
It acts as a temporary account, as he loan is fully processed then the account will be vanished. It holds a clear report about the loans that are in progress and the loans which are fully progressed. Thereby, maintaining a complete track of the progress of loans from application, approval till the preparation for payment.
Banks can easily monitor the status of the each loan and can easily identify any rise in the potential issues. LIP account ensures transparency and efficiency in managing loans and assures financial security.
Other full forms of LLP
- LIP is Language Independent Programming
- Full Form of LIP is Licensed Independent Practitioner
- Full Form of LIP is Low Impact Protein