DEFINITION of 'Advance Commitment'
A promise or agreement to take some future action. For example, a promise by a buyer to purchase goods at a price set beforehand is an advance commitment.
BREAKING DOWN 'Advance Commitment'
In financial markets, parties may make an advance commitment to sell an asset before they own it; the seller often buys a futures contract to offset the risk of a price increase at the time of purchase. In banking, a financial institution will make an advance commitment to a borrower to lend funds on a specified date on agreed-upon terms.
Note that in mortgage banking an advance commitment is called a "standby commitment."