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. Third-Party Distributor

    The name given to institutions that sell or distribute mutual ...
Related Articles
  1. Credit & Loans

    What are my rights under the Fair Debt Collection Practices Act (FDCPA)?

    Read about the rights and protections granted to you as a debtor under the Fair Debt Collections Practices Act, and learn how to respond to creditor violations.
  2. Budgeting

    Negotiating A Debt Settlement

    If you're being harassed by a debt-collection agency, you can take charge. Find out how.
  3. Personal Finance

    Outfox The Debt Collector's Hounds

    Dealing with a collection agency is scary if you don't know your rights. We help you take back the power.
  4. Options & Futures

    8 Ways To Help Family Members In Financial Trouble

    Find out how to help the ones you love without hurting yourself.
  5. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  6. Professionals

    The Lucrative World Of Third-Party Marketing

    Hedge funds don't sell themselves. Marketing experts reel in the big fish.
  7. Professionals

    Understanding Interpersonal Skills

    Interpersonal skills are the social skills people use to interact effectively with other people. A lack of good interpersonal skills may lead to unsuccessful personal relationships, as well as ...
  8. Professionals

    Who Counts as an Entrepreneur?

    An entrepreneur is a person who starts a new business or organization, taking some personal financial risk to do so. He or she may quit a secure job to devote time to starting the new business, ...
  9. Investing

    Understanding Turnover

    Turnover has a number of different, but related, meanings depending on the context in which it is used. Generally, it means the number of times an item is replaced with a new or similar version ...
  10. Investing

    What are Operating Expenses?

    An operating expense is any expenditure made for the purpose of operating a business. These expenses are the day-to-day costs that help keep the business going. Operating expenses are reflected ...

You May Also Like

Hot Definitions
  1. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  2. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  5. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  6. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
Trading Center