Accommodation Paper


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.

  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 ...
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