What Is The Difference Between Debtors And Creditors?

The debtor owes money and the creditor is owed the money.

• Debtors

A debtor is an individual or company that owes money to someone else. They could owe money to a bank, a supplier, a staff member or some other form of money lender. Debts are often taken out for mortgages and loans. The loan could be for anything such as paying the monthly bills or investing in a business plan.

• Creditors

A creditor is a person, party, bank, government or organization which lends money to people who need it. A creditor must be in a financial situation where they can afford to do without that money for an agreed amount of time and they must also consider the fact that the debtor may not be able to pay them back within the allocated time frame. Creditors will often make money from people who cannot afford to pay back a loan as the interest rates rise when they do not meet the installments.

• Lending Money

When the debtor is first lent the money, an arrangement will usually be agreed upon by both parties stating exactly when the money will be repaid by. The money will usually be repaid in installments that are manageable for the debtor and a certain amount of interest will be charged. If the debtor fails to pay this money back within the time allocated, the interest will often rise dramatically. When this happens, it usually makes it even harder for the debtor to pay back the money and a never ending spiral of debt can begin if the debtor does not rectify their situation quickly. Once the debtor is in a situation where they cannot repay their loan installments they may end up in great financial difficulty that is extremely hard to resolve.

A debtor is the person or company that has the debt,  A creditor is the person or company that extends credit to someone for the purchase of something.