Creditor Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Creditor, written in plain English, along with examples of how it is used.
What is Creditor?
It is a person or party to whom something is owed.
History and Meaning of Creditor
A creditor is a person, business or an institution, that has provided goods or services or has loaned money to another person, with the expectation of payment. The debt or obligation can be incurred through credit cards, loans, trade credit or other forms of borrowing. A creditor, also known as a lender, can be contracted to provide money or other resources on an agreed-upon timeline, with interest and fees charged on the outstanding or overdue amount.
In ancient times, borrowing money was a common practice among individuals, merchants, and governments. The earliest known credit system dates back to ancient Babylon, where merchants would borrow money to buy goods to sell at a higher cost. The concept of a creditor has evolved with the development of modern business and finance. Today, creditors are an essential part of the global economy, providing resources and capital for both individuals and entities.
Examples of Creditor
- A bank that lends money to an individual or a business.
- A supplier who provides goods or services to a company on credit.
- A credit card company that provides a line of credit to its customers.
- A government that borrows money through bonds from individual investors or other countries.
- A landlord who is owed rent by a tenant for property usage.
Legal Terms Similar to Creditor
- Debtor - A person, business or institution that owes a debt or obligation to a creditor.
- Lien - A legal claim on an asset that serves as collateral for a debt and that gives the creditor the right to seize the asset if the debtor defaults on payment.
- Guarantor - A third party that takes responsibility for the debt owed by the debtor to the creditor, in case the debtor is unable to pay off the debt.