If you owe money, you’re a debtor. A debtor is a person, corporation, organization, country, or any entity that owes money. Debtors have a legal duty to pay returned what they owe.
If ACME Inc. borrowed $50,000 from its bank, it’s miles a debtor. We discuss with the lender because the creditor.
Wikipedia has the following definition of the term:
“A debtor is an entity that owes a debt to some other entity. The entity can be an individual, a firm, a government, a corporation or different criminal person. The counterparty is known as a creditor.”
“When the counterpart of this debt association is a bank, the debtor is greater frequently known as a borrower.”
Etymology of debtor
Etymology is the examine of wherein phrases come from, i.e., their origins, in addition to how their meanings have advanced over time.
In twelfth-century England, the phrase Dettur and Dettour emerged, with the meaning “person who owes or is indebted to some other for money, services, or goods.”
It got here from the Anglo-French phrase Detour and the Old French phrase Detor, which got here immediately from Debitor, meaning “debtor.”
Between approximately 1560 and 1660, the spelling of the phrase have become Debtor.
Borrower and issuer
Both terms, borrower and issuer, can suggest an entity that owes money. However, we use them in different situations
- Borrower
If my bank presents me a mortgage, I am the borrower and the bank is the creditor. Any association wherein a mortgage is worried has a borrower and creditor.
- Issuer
When governments or huge groups need to borrow money, they’ll difficulty bonds. Investment firms, pension funds, and different traders such as people purchase the bonds. In this case, we name the creditors bondholders and debtors issuers.
Bonds are super-secure investments which earn interest.
Trade debtors
If I deliver ACME Furniture Inc. with, for example, timber, I will ship them an invoice with the delivery. The invoice might also additionally consist of the subsequent phrase: “Payment Terms: 30 days from date of invoice.”
This manner that ACME pays me after thirty days. During that period, ACME owes me money – it’s miles a exchange debtor and I am a creditor.
It is not unusualplace to drop the phrase ‘exchange’ and genuinely discuss with ACME as a debtor.
Suppliers will first test out the creditworthiness of a customer earlier than providing credit score terms. Creditworthiness refers to an entity’s cappotential to pay returned a debt on time. If you’re a great debtor, i.e., you pay what you owe on time and in full, you’re creditworthy. If you’ve got got defaulted on a debt, i.e., by no means paid it returned, you aren’t visible as creditworthy.
In a few cases, my debtor may be my creditor. For example, let’s think I supply timber to ACME Furniture Inc. at the equal day that it supplies a desk to my corporation. We each provide every different 30-day charge terms.
As a ways because the timber buy is concerned, I am the creditor and ACME is the debtor. But ACME is my creditor and I am the debtor concerning the desk buy.
