Debtor is the company or individual who has money, goods or services for a creditor to take a loan. The loan interest – paid by the debtor- is usually defined. The word is originated from the Old French dette which means to owe. It is referred to assets owed.
A basic loan is the simplest form and makes possible to lend money for a certain period of time. Somebody takes a loan in case when he is going to purchase a good. The debtor and the creditor have to agree in the method in which the repayment will be transacted. Usually it is reported with interest. The payment is the summation either in currency or in goods. The loan agreement must contain the period of time of the loan. There are five types of debts: secured (senior) and unsecured (subordinated or junior) debt, private and public debt, syndicated and bilateral debt.
In case of secured debt, the creditor appeals to the assets and have voice. Unsecured debt contains financial obligations and the creditor can’t have voice and resort to the assets.
A debt obligation can be private either senior or mezzanine. Mezzanine is more expensive than the previous one and there are plied by small companies. Contrary to this is the public debt, which is sometimes similar to a government debt, and refers to all money owed to a government, or financial institution. The last loan, syndicated loan permits to the banks to ease down the risk.
There are many cases which can cause debt problems. There are credit card debt and bill debts. With debt counseling counselor can resolve these problems. One of the debt solutions is debt consolidation: this is the simplest way, creditors cut down the interest, and you need to pay single month to your consolidation company. Debt settlement: your outstanding would be reduced by 40-60%. Then you pay a fixed sum to your settlement company. Debt management (DMP): your credit counselor analyzes your financial situations. If you are in great debt problem, your counselor advices to you a DMP and he tries to reduce your rates to your creditors. A self repayment plans you can pay off debts, without any special help. Bankruptcy is your last solution; it is harmful for the credits and causes failure. There are other better solutions than this. The last method is called Ostrich, when you ignore the debt and you hope that it would disappear. It is not advisable!
9 Jul
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