Creditor

Definition

A creditor is an individual or institution that lends money or extends credit to another party. Creditors are entitled to receive repayment of the principal amount along with any agreed-upon interest.

5 Must Know Facts For Your Next Test

1. Creditors can be classified into secured and unsecured, depending on whether they have claims backed by collateral.
2. In financial accounting, creditors are considered liabilities on a company's balance sheet.
3. The relationship between creditors and debtors is legally binding and often involves a contract detailing terms of repayment.
4. Interest payments to creditors are recorded as expenses in a company's income statement.
5. Creditors assess the creditworthiness of borrowers through credit ratings and financial statements.

Related terms

Debtor: one sentence definition

Interest Expense:

one sentence definition

Collateral:

one sentence definition