what is a creditor 
a creditor is an individual or institution that extends credit to another party to borrow money usually by a loan agreement or contract creditors are commonly classified as personal or real those who loan money to friends or family or a business that provides immediate supplies or services to a company or individual but allows for a delay in payment may be considered personal creditors real creditors are banks or finance companies that have legal contracts and loan agreements with the borrower that grant the lender the right to claim any of the debtor s real assets or collateral if the loan is unpaid understanding creditorscreditors often charge interest on the loans they offer their clients such as a 5 interest rate on a 5 000 loan the interest represents the borrower s cost of the loan and the creditor s degree of risk that the borrower may not repay the loan to mitigate risk most creditors tie interest rates or fees to the borrower s creditworthiness and past credit history borrowers with good credit scores are considered low risk to creditors and these borrowers often garner low interest rates in contrast borrowers with low credit scores are riskier for creditors and are often charged higher interest rates to address that risk while the creditor is the entity that extends credit a debtor is the legal party that accepts the credit or loan owes the debt and agrees to its repayment 