DEFINITION of 'Accommodation Paper'

A negotiable instrument that provides a third-party promise of payment in the case that the original borrower does not live up to the terms of the original transaction. Accommodation papers are usually used to support one party's creditworthiness through endorsement by a second party with a better credit rating.

BREAKING DOWN 'Accommodation Paper'

Accommodation papers enable borrowers to obtain loans for which they would not otherwise be qualified, and may also reduce the rate of interest the borrower will be charged. For example, accommodation papers may be used by parents who want to help their children obtain credit for the first time, or by parent companies supporting their subsidiaries.

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