DEFINITION of 'Back-to-Back Commitment'

A commitment to make a second take-out loan that piggybacks another loan. With a back-to-back commitment, once the terms of the first loan are satisfied, it will be rolled into the second loan.

BREAKING DOWN 'Back-to-Back Commitment'

The best example of a back-to-back commitment is when a bank makes a construction loan to build a house. Once the house has been built and a certificate of occupancy issued, the bank will make a new loan, probably a first mortgage loan, to take out the construction loan. The bank's commitment will specify the conditions that must be met in order for the commitment to fund the second loan to be valid.

RELATED TERMS
  1. Loan Commitment

    A loan commitment is a loan that may be drawn down or is due ...
  2. Back-to-Back Loan

    A loan in which two companies in different countries borrow offsetting ...
  3. Combination Loan

    1. A transaction consisting of two separate loans for the same ...
  4. Term Loan

    A loan from a bank for a specific amount that has a specified ...
  5. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
  6. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
Related Articles
  1. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  2. Retirement

    Business Owners: A Guide To Qualified Retirement Plan Loans

    Thinking of adding a loan feature to your company's plan? Here's what you need to know.
  3. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  4. Managing Wealth

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  5. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  6. Personal Finance

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  7. Personal Finance

    College Loans: Private vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  8. Investing

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
RELATED FAQS
  1. How do you use a back-to-back loan?

    Back-to-back loans or parallel loans are a financial move used by companies to curb foreign exchange rate risk or currency ... Read Answer >>
Trading Center