Third Party

AAA

DEFINITION of 'Third Party'

An individual or entity that is involved in a transaction but is not one of the principals. The third party often has a lesser interest in the transaction than the principals.

INVESTOPEDIA EXPLAINS 'Third Party'

An example of a third party would be the escrow company in a real estate transaction. The first two parties, the principals, are the buyer and seller. The escrow company acts as a neutral agent to collect the documents and money that the buyer and seller need to exchange to complete the transaction. While the escrow company receives a fee for performing its services, this fee is its only interest in the real estate transaction.





As another example, if a debtor owes a creditor a sum of money and hasn't been making the scheduled payments, the creditor is likely to hire a third party, a collection agency, to ensure that the debtor honors his agreement. The collection agency has an interest in the transaction because it gets paid for collecting debts, but it is arguably the two principals, the debtor and the creditor, that have the greatest interest in the transaction.



RELATED TERMS
  1. Umpire Clause

    The language in an insurance policy that provides for a means ...
  2. Third-Party Verification - TPV

    When an outside organization reviews a customer's information ...
  3. Third-Party Transaction

    A third-party transaction is a business deal involving a buyer, ...
  4. Indirect Loan

    Any loan that is transferred from a dealer who originated the ...
  5. Third-Party Claims Administrator

    This type of administrator processes claims for a third-party ...
  6. Creditor

    An entity (person or institution) that extends credit by giving ...
Related Articles
  1. What are my rights under the Fair Debt ...
    Credit & Loans

    What are my rights under the Fair Debt ...

  2. Negotiating A Debt Settlement
    Budgeting

    Negotiating A Debt Settlement

  3. Outfox The Debt Collector's Hounds
    Personal Finance

    Outfox The Debt Collector's Hounds

  4. 8 Ways To Help Family Members In Financial ...
    Options & Futures

    8 Ways To Help Family Members In Financial ...

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center