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Debtors and creditorsA person, who receives the liability from creditor, is called as the debtor. It receives the money from the lender. Debtor makes some promise with creditor about the repayment at certain amount at later time. Debtors are referred in the financial statements usually as the current assets. Creditor is the party has provided services to the other party. Creditor may be person, government, organization and company. It provides services in the form of liability or assets to the second party by contract such that second party will return the same service or assets after later time. The second party is called as the debtor.
Debtor can called as to money acceptor from lender. Debtor is also called as the borrower. It is exactly opposite to the concept of creditor. In simple words, the creditor is the person to whom someone owes the money. The term creditor is used in the financial world for short term loans, personal loan, mortgage loan, and long term loan. Creditor is the derivation of credit.
Generally debt comes under two categories as secured debt and unsecured debt. With the secure debt, borrower pleaded to secure loan payment. It consists of high loan amount, lower interest rates and flexible repayment. In unsecured debt, there is no collateral as far as assurance is concerned. If there is any default in repayment, the creditor has to right to collect the debt from the borrower. There are number of methods to solve such problems.For collecting the debt, creditor can seek for third party interference that can be the court or any other form of institutions.
Financial statements present the creditor as long term liabilities and current liabilities. Financial statement is the statement consisting of all the financial transaction. It provides the financial condition for business profitability. Long term liabilities are referred as the liabilities which are created for future, generally for more than one year. Most form of the long term liabilities are bank loan, mortgage loan and vehicle loan.Current liabilities are considered as the liability for the business in the form of cash, which need to be paid within one year. The examples of current liability are payable for goods and services, any advance received, etc.
Some times, it so happens that he creditors cant be repaid the amount. It is important to have debt management plans for securing the future. For the debt management services, there are many debt management companies. Debt services generally include credit counseling, debt management and repayment scheduling. It helps for the lowering the interest rates applicable on the financial instruments. These services are designed for the people, who are struggling with there finance. Now days, bad credit consolidation loan is the most preferred loan for the debtors. The loans are designed for the debtor in such a way that it can be easily borrowed and can settles down the debts for improving the credit score.
Overview
Debt management is necessary, because it manages the financial obligations. It helps to protect from creditors harassment and for improving the credit ratings. Lender calculates the details of loans through a combination of the credit score of the borrower, ability of repayment, ability to document access, down payment and amount of equity as property. Lender calculates the rate of interest depending upon the credit score of the borrower.
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