The creditor or creditor is the person or institution that issues money or some other kind of money to another person or institution with guarantee that the other party, or the debtor, will then return the credit in one payment or multiple payments and pay the loan in addition.
Interest payments by the issuer. Interest means that the debtor must also pay a percentage of the outstanding loan amount each time he makes a monthly payment. From a creditor side, a loan is a very good way of securing passive income if you have the free money to use to lend.
Creditors are usually wealthy entrepreneurs
Banks or non-bank creditors, but theoretically the creditor can be anyone and you can also be a creditor to your friend or family by lending money or some other valuables. Basically, creditors use the money as a lending tool, because the money is nowadays the main value of the economy and it can buy anything and sell anything (almost anything). With this interest, the creditor can earn money from the debtor just because he has lent him that money.
And then it would only be logical to charge such interest, because not only the creditor assumes the risk of lending money, because it can also not be repaid, but he could use that money in another way, but chose to lend it, and he is therefore entitled to compensation.
To understand why a creditor wants to give credit
We can think about how these people or businesses have usually got these funds. Traditionally, businessmen have been working long hours to collect and earn all the money they own now, and after they have done it, they just didn’t want to spend or lose it. And certainly, They are also thinking about how to make extra money with as little work as possible, because it took a very long time to earn that money.
Then these people and their companies are then also profitable to give money to other people and institutions, and to receive interest there, because they will both gain profits and they will not have to make a special effort. Bank? And while the above is true for individual investors and private creditors, banks are quite different and their business model is also different.
Banks usually borrow money themselves
For example, from the central bank of the country to a lower interest rate than the money is then given to debtors. And by issuing huge amounts of money in this way, banks earn even when they charge a small amount of money. And then the banks also issue short-term loans, which are credit and consumer loans, which then have much higher interest rates and which then make up a large part of any bank’s profit.
which gives them additional benefits. Where there is demand is supply and if people do not take quick loans, then such creditors would not exist, but today’s society has YOLO, or (You live once) culture, so we prefer to take credit and then pay instead of to save and then buy what it really should be.