Accommodation Paper

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Accommodation Endorser

    An entity or person who agrees to back the credit obligations ...
  2. Contingent Liability

    A potential obligation that may be incurred depending on the ...
  3. Cosign

    The act of signing for another person's debt which involves a ...
  4. Default Risk

    The event in which companies or individuals will be unable to ...
  5. Downstream Guarantee

    A guarantee placed on a loan on behalf of the borrowing party ...
  6. Accommodation Endorsement

    A written agreement from one entity to back the credit liability ...
Related Articles
  1. Budgeting

    When Financial Crisis Strikes The Bank Of Mom And Dad

    If you really want your kids to learn to be financially responsible adults, it's time to stop giving them money.
  2. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  3. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  4. Retirement

    The Best Way To Borrow

    There are many avenues from which to drum up funding. Find out the pros and cons of each.
  5. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  6. Economics

    What’s Driving U.S. Stocks? Irony.

    A seesaw week for U.S. stocks ended on the upside last week, though the rally was more a function of slow growth rather than a booming economy.
  7. Mutual Funds & ETFs

    How To Choose The Right ETF?

    Choosing the right ETF really isn’t that complicated. If you stay focused on a few key areas, you may find the experience to be much easier.
  8. Economics

    What Is The Labor Market Conundrum?

    We are facing a conundrum with investment implications: Why are wages still stagnant, when jobs are being created at the fastest pace since the late 90's?
  9. Credit & Loans

    Why Your Credit Report Errors Will Now Be Easier To Fix

    Equifax, Experian and TransUnion have reached an agreement to make changes to how they handle credit report errors and unpaid medical bills.
  10. Taxes

    What To Do If You Lost Your W-2

    There's no need to panic if you don't have your Form W-2 to file taxes, there are easy ways to gain access to the missing form or file without it.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center