In economic operations as common as loans or payments for work performed, there are usually two parties, the one who pays and the one who collects. In this scenario we go on to answer the question what does creditor mean? with the following definition:
A creditor can be any natural or legal person who has granted a monetary credit, has carried out a job or has delivered a material good and in exchange, normally expects to receive a previously agreed amount of money . The creditor will be in charge of marking the payment conditions and will be fully entitled to claim the debt. In the event that the debtor does not have the agreed money, a material asset of the same value may be required in exchange, such as a house or a car.
What types of creditors are there?
Having seen what creditor means, you will have realized that there can be several types, such as banks, financial institutions, companies or even ordinary people. These can be basically classified into two types of creditors:
- Personal creditor: when a friend or relative leaves you money without any type of legal agreement and the loan is based on trust, there is no legal way to prove it. However, a business relationship is established in which the person who leaves the money is distinguished as the creditor and the debtor who receives it. Therefore, the creditor has the right to collect the debt and the debtor, the obligation to pay it.
- Real creditor: on the other hand, when there is a legal and binding contract between both parties, the creditor will have the option to collect their debt in almost all cases, since they have the option of going to court and reporting that they have not received the agreed payment. The debtor has the obligation to comply with this payment, if he does not do so, he can become defaulter against the law, with all the problems that this entails. If this happens, material assets may be expropriated until the debt is paid.
Examples of creditor
There are several situations in which we can identify the figure of the creditor, here are some examples:
- The most obvious example is when a bank or fast lender leaves you money. In these cases, they become creditors and you become a debtor, with all that that means.
- If you work for a company in exchange for a salary, in this case you are the creditor, since there is a contract in which the payment conditions are clearly specified, usually at the end or beginning of each month. Therefore, all employed workers are also creditors , that is why they have all their legal right to collect their wages.
- We all enjoy services such as electricity, water or gas. In these cases, the companies that provide us with this type of service become creditors as soon as you receive your monthly consumption bill.
We hope with these examples and the definition of creditor has made clear to you the meaning of this term that we usually hear, but not always understand. So in short, any person, company or entity can become a creditor when they have the right to receive a payment.