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
An increase in land occurring from the withdrawal of a body of water. Normally, when reliction occurs, the increase in land area belongs to the individual having water rights in the area. ...
To understand the definition of the term demised premises, one must understand what demise means. Because demised premises is a widespread use for the term demise. The demised premises ...
Economic or physical life of a fixed asset. The property is depreciated over the period benefited. ...
Expected period that property will provide benefits. It is typically less than physical life of the property because the property continues to have physical life regardless of inefficiency ...
Horizontally placed timber that is connected to other timber. Smooth, flat, thin piece of metal. Electrical covering. ...
A lease requiring tenants to pay all utilities, insurance, taxes, and maintenance costs. ...
The term foraging comes from the old germanic language, which passed through Old French “fuerre” and “fourrage” and it means the search for wild food resources. ...
Ownership of property by two or more people in undivided interests, without the right of survivorship. Each coowner's interest may be conveyed separately by its owner. Tenancy in common ...
Fan with an opening to the outside air that lets stale or hot air exit the structure; usually used in a kitchen when cooking or in a bathroom that does not have a window. It is used for ...
Have a question or comment?
We're here to help.