Definition of "Obligor"
The definition of obligor is a position that comes from obligation and indicates a party that has ‘promised’ to perform a specific act. In the financing world, an obligor is also known as a debtor. It can apply to someone who is obliged legally or through a contract to pay a debt, to provide a service, to transfer a title, or provide benefit to another.
The meaning of the term “obligor” is used in financial context to refer to an issuer of a bond. The bond issuer is contractually obliged to meet the required repayments and interest payments for an outstanding debt. The one who receives the compensation or benefits is the obligee.
How does an obligor work?
As mentioned above, an obligor’s position comes with an obligation that legally bounds the obligor to the obligee. The most common types of obligors are debt holders. The obligor is required contractually to repay their debt and to repay interest. Obligors can be found in corporate settings or personal settings. We’ll take a look at their obligations in each situation.
Corporate Setting Obligor
In the corporate world, an obligor doesn’t only deal with the payment requirements, but also with covenants which can be affirmative or negative. The affirmative covenant is a requirement of the obligor, like meeting a target or benchmark in performance. The negative covenant is a restriction that limits the obligor’s ability to do something, like changing the structure of a company’s leadership.
Because obligors are contractually obliged by these covenants, they have little freedom from them regarding payments. A delay in payments can have long-term repercussions and can be seen as a default for the bond issuer.
Personal Setting Obligor
A person can become an obligor in their personal life as well. In family disputes, divorce affects real estate, but there are situations when the court issues an order that obliges one of the parents to pay a monthly fee in child support so that the other parent can use it to raise the children. This would make the paying parent an obligor. A personal setting obligor can request a recalculation of the child support if their financial status changes as child support result from the obligor’s salary.
In case the obligor loses their job, and they do not request a recalculation of child support, they can face other problems. The court can impose wage garnishments and loss of driver’s license, amongst other things.
When an insurance company has a life insurance policy, and the insured individual dies, the insurance company becomes the obligor. Through the life insurance policy the insurance company is contractually obliged to compensate the beneficiary of the life insurance policy as stipulated within the policy itself.
Real Estate Tips:
We at RealEstateAgent.com feel it is our obligation to pass good real estate knowledge forward, so free feel to use our real estate glossary terms.
And contact a real estate agent; they’re the obligor when it comes to responsible services for people buying or selling a home!
Popular Real Estate Terms
A forced sale or forced liquidation typically means an involuntary sale of valuables or property for financial reasons. If an unpredictable or uncontrollable event emerges, a seller must ...
Derogative term describing a high-pressure telemarketing office where sales personnel often use extremely exaggerated claims as well as intense sales practices to convince targets clients ...
Right of an individual to be offered something before it is offered to others. For example, a tenant whose apartment is going to be converted to a cooperative has the first right of ...
One who has committed a tort. A tort is a civil wrong that occurs as a result of a breach of legal duty owed to someone, e.g., negligence. A tort does not arise from a breach of contract. ...
A portion of a real estate company's assets financed with debt instead of equity. It involves interest an principal obligations. Financial leverage is beneficial to real estate investors ...
The largest financial intermediaries directly involved in the financing of real estate. Commercial banks act as lenders for a multitude of loans. While they occasionally provide financing ...
Sales commission charged to buy shares in a real estate mutual fund sold by a broker or salesperson. Typically, the fee ranges from about 1 percent to 8 percent of the initial investment. ...
maintenance procedures conducted to prevent later repairs and furthering a longer useful life. For example, many boilers and burners are cleaned and serviced each year before the winter ...
The amount of a periodic payment, whether monthly, quarterly, or annually, including interest and principal, required for a mortgage payment. ...
Have a question or comment?
We're here to help.