A two-party check is a legal document drawn up by a financial institution, bank or a credit union. It is designed to cover all the obligations that are due from the debtor to the lender. As the name suggests, it covers two parties and is signed by both of them. The document does not cover the transaction between the two parties but merely the obligations that are due to each party.
A two-party check ensures that you will be paying back a loan promptly. It is essentially required when you are taking a mortgage or line of credit from a bank. Such a document is often required during employment, credit cards and student loans. However, it is not limited to these kinds of loans and can be used for other kinds of loans too. To avail yourself of such a loan, you need to have a two-party check. Banks often require one and borrowers often request for a second.
When a borrower wants to borrow money from a lending institution, he needs to have a two-party check drawn up. This serves two purposes. Firstly, it acts as proof that the borrower has paid the debt in full. Secondly, it helps the bank or financial company to determine whether the borrower is reliable or not.
There are many reasons why a bank requires a check drawn up. A major one is the verification of a borrower’s financial status. If the bank finds out that the borrower has missed several payments or has declared bankruptcy, then a bankruptcy check is necessary. Similarly, if a borrower has been defaulters and the bank believes him to be a high risk, then it needs to know about the credit rating and records. If there is no record of the borrower’s debts and bad credit history, a lender will not consider him as a high risk borrower and will not provide him with a loan.
Many people who are planning to rent an apartment or a house often ask about a two-party agreement. This refers to the condition under which a tenant is supposed to pay the rent. Usually, such a condition does not specify a specific amount that has to be paid by the tenant. However, most of the time, a two-party agreement stipulates that the tenant should pay a certain amount every month.
Another reason why a bank requires a two-party check is to ensure that the client is a trustworthy person. There are many cases of individuals intentionally making late payments. This tends to attract a lot of penalties. Such a person may end up being turned over to the collection department of the bank and that would be quite embarrassing for him. Therefore, such a case requires the bank to conduct an inquiry before it finally accepts the application from the client.
