Are you a financially smart person?
A lot of people want to be good with money, but only a few are. As someone who strives for financial independence and security, you have to constantly grow what you know about money.
For example, understanding the terms and conditions of your loans or credit cards can be key to managing your finances. The same holds true if you’re responsible for collecting payments from another party.
To make things easier, this blog post will take a look at some common financial terms. What’s the difference between a debtor vs creditor? How do installments and securities work?
Read on to better understand what’s going on with your money.
What Is a Creditor?
First, when it comes to a debtor vs creditor, a creditor is a person or company who receives money from a debtor. If you lend money to someone, you’re technically a creditor. Landlords, car dealerships, utilities, credit card companies, and banks are some of the most common creditors.
Creditors usually want to receive payment on the full amount coming to them. However, they have to follow different sets of laws, depending on the debt. For instance, landlord-tenant laws help protect both the creditor and tenants.
Sometimes they will agree to accept part payment. However, it can be difficult for debtors to persuade creditors to take less money than what they are owed. Even if a creditor agrees to take a partial payment, they may still choose to enforce a security. The enforcement would take place if the debtor does not pay the rest of the installments.
What Is a Debtor?
A debtor is a person or company who owes money. Debtors may be individuals or corporations.
Do you owe a lot of money to a third party? If you have too much debt, sources like https://becomedebtfree.co.uk/ can help you create a debt-free plan.
The person responsible for paying the creditors can have different names. For instance, the responsible party is the “guarantor” if there has been a personal guarantee. However, they are the “principal debtor” when money has been lent on a mortgage and there’s a conditional sale on the land contract.
What Is a Security?
A security is something that gives its owner the right to sell or use it, in order to get his money back. One of the most common types of security is a mortgage. However, there are many other kinds of security instruments. The most common ones concerning consumer debts include:
- Personal guarantees
- Conditional sales contracts
- Land contracts
- Trust deeds
A trust deed is a form of security used to enforce the repurchase or repayment agreements in real estate transactions.
What Is an Installment Lending Arrangement?
An installment is a promise to pay off money that has been borrowed over a period of time. Installment agreements are often used to purchase goods such as cars, trucks, and houses. They may also be used for credit card purchases or other types of debt like rent.
Understanding Debtor vs Creditor Relationships
Understanding the difference between a debtor vs creditor is important for your success. If you are a creditor (someone who owes money), it can help you understand how much risk there may be in an investment.
If you are a debtor (someone who owes money), knowing where you stand as a borrower can lead to better decisions about managing debt or investing savings. We challenge you to learn a few more financial terms today and cement them in your mental database. For help, take a few minutes to explore the rest of our site!