Author Topic: Debtors, Creditors, and Debt Explained  (Read 1075 times)

wjtrader

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Debtors, Creditors, and Debt Explained
« on: Feb 09, 2009, 09:32:56 PM »
I'll reguarly supply you lot with articles, as there pretty useful and provide some good info. Good to know these details especially in this financial climate. Hope you enjoy  ;)

Debtors, Creditors, and Debt Explained -

Reading through most financial institutions and lending company disclosures can be confusing. They throw a significant amount of legal terminology and often label specific individuals and groups of individuals by names such as debtor and creditor. This can make it confusing since there are so many different definitions.

These terms however are not difficult to understand and often when you understand these terms, what they mean and how they apply to the disclosure it can make it easier to read disclosures and understand your rights as a person who is obtaining credit and incurring a debt. There are a number of rights and responsibilities that people who are given the classification of debtor for the purposes of the agreement. The term or label of debtors tends to send up negative connotations in many people's minds because of the stigma that is placed on the term debt.

Debt in and of itself and being a debtor in and of itself is not a bad thing. It simply means that a debt has been taken out and the debtor is the person who has taken this debt out. More often because of these negative connotations, you may find debtor inner changed with lendee, in other words the person to whom money was lent. Alternatively, with credit cards you may see it interchanged with the term cardholder or applicant in some cases. In most cases, however the term debtor is usually replaced with borrower. All of these terms can be used interchangeably based on what type of document or disclosure is being used.

A creditor is slightly easier to understand in any of its forms. A creditor is a lender, a credit card provider or financial institution when it comes to lending out money and providing line of credit. A creditor can also refer to a company who is attempting to collect a debt. This can be the original lender or it can be used to refer to a collection agency, which is in charge of collecting a debt. In some cases, a creditor may be a lawyer's office or a separate company. There are a number of different types where you will find the term creditor.

As with the term debtor, there are a number of negative connotations and reflections that are made when people hear the term creditor because it is so often used as a way to describe those who collect debts. Normally, you would have only minimal interactions with your creditors and this contact usually exists simply in the form of bill and payment. It is only when debts become overwhelming that the word creditor becomes something to avoid and the word alone because of the negative connotations attached to it, cause a great deal of stress and anxiety for people who are having difficulty with their debt. It associated with a stereotype of calls that are received when people are having difficulty making payments. However, the term creditor covers a much broader base than this.

Debt, it covers a wide range of different expenses. It primarily refers to credit purchases that are paid off over an extended period of time. For example, credit cards, mortgages, car loans, even leases can be considered debt. The biggest category of debt that is going to create problems for people is going to be credit card debt. The reason for this is that this type of debt has not only a variable interest rate but also one that can increase rapidly and quickly create a difficult situation.

Debt however if managed correctly can provide you with a number of benefits. Being debt free is often considered to be an ideal situation however there are disadvantages to this. Everyone considers debt to be a bad thing; this is because it so often becomes something that creates stress, anxiety and financial difficulties. However, debt in and of itself is not a bad thing. In fact, it can be quite useful provided that it is not allowed to take over your finances. Many organizations at credit history, the way you managed your debt before they lease an apartment or approve you for a loan.

This is because it shows a viable record that you made payments on a debt in a timely fashion. There is no way to measure this without debt and so in these situation you may end up having issues obtaining the approval you need because of a lack of history to prove that you have paid off credit cards and other forms of debt promptly and in a responsible manner. Debt can be something that overwhelms you or something that provides you with the means to lease a home or apartment purchase a car or obtain a personal loan. Many people when they first start out working with credit based purchasing do not realize the danger of credit card debt. They also do not realize how quickly credit card debt can get out of hand. It is important to ensure that debt is managed carefully in order to not allow it to get out of control. Once debt reaches the point where it overwhelms you, financially it can be difficult to get back under control and it has far-reaching effects. Many negatives stay on your credit report for years in some cases it can be more than a decade before a negative mark is removed from your credit and even more time before your credit score recovers.

This is why it is important to make sure that you know what your rights are, what debtor, creditor and what debt is. These definitions and the various replacements for them such as borrower, lender and so forth are necessary in order to ensure that you know exactly what is written in the terms and agreements that you sign when you take out a loan or credit card. This is the first step to ensuring that you make the right decisions when it comes to the types of debt and types of lenders that you borrow from.