creditor

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noun cred·i·tor \ ˈkre-di-tər , -ˌtȯr \
Updated on: 26 Jul 2017

Definition of creditor

:one to whom a debt is owed; especially :a person to whom money or goods are due

Examples of creditor in a Sentence

  1. She owes thousands of dollars to creditors.

Recent Examples of creditor from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'creditor.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of creditor

15th century


Financial Definition of CREDITOR

creditor

What It Is

A creditor is an individual or institution that lends money or services to another entity under a repayment agreement.

How It Works

There are generally two types of creditors: personal and real. Personal creditors are people who loan money to friends or family. Real creditors are financial entities who require borrowers to sign legal contracts that grant the creditor some sort of collateral -- e.g. car, house, jewelry --  if the borrower fails to repay the loan.

Let's look at a scenario with a real creditor, XYZ Bank, to whom you go to for a loan. If you are approved and they lend you money, XYZ Bank becomes your creditor.

Individuals and companies can have several creditors at any given time, for many different types of debt. Additional examples of creditors who extend credit lines of money or services include: utility companies, health clubs, phone companies and credit card issuers.

Not all creditors are considered equal. Some creditors are considered superior to others (senior), while others are subordinate.

For example, if Company XYZ issues bonds, the bondholders become creditors senior to Company XYZ's shareholders. And should Company XYZ then go bankrupt, the senior bondholders are entitled to repayment before the shareholders are.

Why It Matters

If a borrower does not repay the credit, creditors have the legal right to:

1Sue to obtain access to accounts or other assets if the borrower has not paid.
2Place liens on the borrower's assets. This means the borrower cannot sell the assets without paying the creditor first.

The distinction between senior debt and subordinated debt is crucial for creditors and investors. Senior debt is considered less risky than subordinated debt because it is first in line to be repaid once means for repayment have become available. That means that the interest rate paid on senior debt is lower than that paid on unsecured debt.


CREDITOR Defined for English Language Learners

creditor

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noun

Definition of creditor for English Language Learners

  • : a person, bank, or company that lends money to someone


CREDITOR Defined for Kids

creditor

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noun cred·i·tor \ ˈkre-də-tər \

Definition of creditor for Students

:a person to whom a debt is owed

Law Dictionary

creditor

play
noun cred·i·tor \ ˈkre-də-tər, -ˌtȯr \

legal Definition of creditor

:a person to whom a debt is owed; especially :a person to whom money or goods are due — compare debtor, obligor
general creditor
:a creditor who is not secured by a lien or other security interest called also unsecured creditor
judgment creditor
:a creditor who has a money judgment entered against the debtor and may enforce the judgment (as by attachment or writ of execution)
known creditor
:a creditor whose potential claim is known or should be known by a debtor and who is entitled to notice of a corporate dissolution or of a date at which claims will be barred (as in bankruptcy)
lien creditor
:a creditor who is secured by a lien (as by attachment)
secured creditor
:a creditor who has a security interest (as a mortgage)
unsecured creditor
:general creditor in this entry


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