Are you a Creditor or a Debtor?

Are you a Creditor or a Debtor?

To understand the difference between the two positions, we need to first define the words.

A DEBTOR is someone who owes with the intention to repay. This person has a job and is willing to pay while things are going well, but in hard times they may not have the ability to pay. They have every intention to pay their debt, meaning they are spending money they have yet to earn.

A CREDITOR on the other hand borrows money and is in quite a different position. They HAVE money and could use their own money, but because of the control and other opportunities that may be available, they choose to keep their money and borrow the money they need from a lending or financial institution. Creditors seek to find opportunities where they can earn greater amounts on the dollar they have, than the cost that they will pay to borrow the funds. Control of their cash flow and the liquid benefits it provides, keeps the creditor in a master position of his/her money.

Access to capitol—YOUR capitol—has a value all its own. This is the very reason that banks loan out YOUR deposits to their loan applicants, rather than using the banks assets or the banks money as loan capitol.

There is a cost to use your money as well as there is to using someone else’s money. Most of the time, it pays to keep your money in the “bank” or in your control, and earning interest for you, rather than the old adage of “paying cash for everything.” “Paying cash for everything” destroys your ability to earn interest.

If you have money saved and you need to make a major purchase, always compare the cost of using your money, as well as the cost of borrowing. “Paying cash for everything” is more of an emotional feel-good reaction rather than a smart strategy for building wealth and improving cash flow.

Wise up and think outside of the box when it comes to borrowing and paying back a loan. The bottom line is to have more money, not just pay off a debt. Learn how to use borrowed money or your indebtedness to help you make more money.