Avalize

AAA

DEFINITION of 'Avalize'

The act of having a third party (usually a bank or lending institution) guarantee the obligations of a buyer to a seller per the terms of a contract such as a promissory note or purchase agreement. The bank, by "avalizing" the document (usually "by aval" will be written on the document itself), acts as a cosigner with the buyer in the transaction.

INVESTOPEDIA EXPLAINS 'Avalize'

To avalize means "to give one's accord". It is a rarely used but is an effective method of securing the rights of the receiving party in the transaction. This is an obligation that a bank will only take on with lucrative customers. It is seen as an act of good faith by both parties.

RELATED TERMS
  1. Guarantor

    A person who guarantees to pay for someone else's debt if he ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Default Risk

    The event in which companies or individuals will be unable to ...
  4. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities ...
  5. Aval

    A guarantee added to a debt obligation by a third party who is ...
  6. Structured Transaction

    A series of transactions that could have been treated as a single ...
RELATED FAQS
  1. What's the difference between a bank guarantee and a letter of credit?

    A bank guarantee and a letter of credit are similar in many ways but they're two different things. Letters of credit ensure ... Read Full Answer >>
  2. How does your checking account affect your credit score?

    Your credit report provides a snapshot for prospective lenders, landlords and employers of how you handle credit. For any ... Read Full Answer >>
  3. What is the banking sector?

    The banking sector is the section of the economy devoted to the holding of financial assets for others, investing those financial ... Read Full Answer >>
  4. What's the difference between a letter of credit and a bank guarantee?

    Bank guarantees represent a more significant contractual obligation for banks than letters of credit do. A letter of credit ... Read Full Answer >>
  5. How do leverage ratios help to regulate how much banks lend or invest?

    Banks are among the most leveraged institutions in the United States; the combination of fractional-reserve banking and Federal ... Read Full Answer >>
  6. Can I use a prepaid credit card to pay bills or to transfer money to other accounts?

    Prepaid credit cards may be used to both pay bills, either as a one-time transaction or recurring transaction, and to transfer ... Read Full Answer >>
Related Articles
  1. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  2. Professionals

    Wanna Be A Bigwig? Try Investment Banking

    A career in this high-stress field can be very rewarding for the right person. Find out if you have what it takes.
  3. Economics

    Explaining the Liquidity Coverage Ratio

    The liquidity coverage ratio requires banks and other financial institutions to hold enough cash and liquid assets on hand to weather market stress.
  4. Investing Basics

    Calculating the Tier 1 Capital Ratio

    The Tier 1 capital ratio is a measure of a depository financial institution’s financial health and capital adequacy.
  5. Savings

    Explaining Term Deposits

    A term deposit (more often called a certificate of deposit or CD) is a deposit account that is made for a specific period of time.
  6. Savings

    Bank Lingo: Routing Number Vs. Account Number

    Each consumer bank account has its own personal ID. And so does the bank. How do these numbers function and how do they protect the account holder?
  7. Investing Basics

    Do You Know These Odd Investing & Business Terms?

    Think investment talk is boring? There are plenty of terms to liven up any conversation about Wall Street and finance. You should try some of them out.
  8. Credit & Loans

    What is a Financial Institution?

    A financial institution is in business to, among other things, accept deposits, make loans, exchange currencies, and broker investment securities.
  9. Economics

    What Does Principal Mean?

    For banks, principal refers to the amount due on a loan, and is used to calculate interest payments.
  10. Economics

    Explaining Prime Rate

    Prime rate is the interest rate banks charge their best (e.g. prime) customers.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!