Payday Loan Canada

Mortgage Dictionary -> Creditor

What Is A Creditor?

A creditor is someone who loans something to a borrower. Sometimes a creditor is a person, but most often a creditor is a bank or credit card company or other lending institution. If you loan your friend ten dollars until payday, then you are a creditor and your friend is a debtor or borrower.

When your bank loans you money to buy a house, then the bank is a creditor. When you use your credit card to make a purchase, then the credit card company is a creditor. When you purchase an automobile on time through an acceptance corporation, then that corporation is a creditor. Even when the landscaping company does your lawn today and you pay at the end of the month, the landscaping company is a creditor. There are many examples of companies providing services being creditors like the electric company, phone company, water company, gas company and others. They all provide the service and expect to be paid later, usually at the end of the month. They are all creditors.

Most of the time when we think of creditors and debtors, we think of money. Whoever is doing the lending is the creditor and whoever is doing the borrowing is the debtor. Sometimes it is a straightforward deal like you loaning your friend ten bucks until payday. In most cases, like those involving banks and corporations, creditors need some assurance that you will pay the debt and they will want some interest on the money they are lending. The assurance comes in the form of collateral. For example, the bank doesn't just give you the money to go out and buy a house. They approve the house and the loan, and then they take a mortgage against that house. That way if you do not pay, they can foreclose and take the house in place of the money.

Credit card companies do not require collateral; however they do limit the amount you can borrow. They are creditors and nearly all creditors will charge you interest on what they lend you. This is not necessarily a bad thing, it is just good business. Creditors are in the business of lending money and interest on that money is how they get paid. The key for you is to not have too many creditors.

Too many cooks spoil the broth and too many creditors spoil the credit rating.