Difference Between Creditor and Debtor

Creditor vs Debtor

Creditor and Debtor are two terms that have to be understood with difference. They are two important terms often used in business circles. They have different meanings and connotations.

A creditor is a person who lends money and hence is a person to whom a debt owes. A debtor is a person on the other hand who has to repay the debt that he owes to a creditor. This is the major difference between a creditor and a debtor.

The term creditor also refers to a person or a company that gives credit for money or goods. It is interesting to note that the word creditor is derived from the Latin word ‘creditor’. As a matter of fact a creditor charges some sort of interest for the credit for money or goods that he gives. The amount of interest depends on the agreement between the creditor and the debtor. In many cases the interest charged is based on monthly basis.

On the other hand a debtor pays interest to the creditor for the credit for money or goods that he enjoys for a period of time. The interest that he pays to the creditor depends upon the agreement made between him and the creditor. This is a major difference between a creditor and a debtor. The debtor is liable to pay more interest in case of default.

The creditor can take the debtor to court in case of default in payment or in the event of dishonoring of checks issued to him by the debtor. On the other hand a debtor too can take a creditor to court in the case of heavy interest charged by him. A debtor and a creditor are two important persons involved in the making of any business for that matter. These are the differences between a creditor and a debtor.