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
Real annual return on a real estate investment. It equates the initial investment with the present value of future net cash inflows from the investment. The IRR can be determined by using a ...
An insurance policy indemnifying a property owner up to the limits of the policy against fire or other hazard requiring the total destruction and removal of the structure. ...
Combination of insurance policies on property with each providing an additional increment of coverage exceeding the limits of the preceding policy. For example, policy A adds $70,000, then ...
The Principle of conformity states that conformity is achieved when all the entities or objects comply to the same standard, rules or laws. This creates a balance and stability between ...
(1) Judgment against a defendant who does not respond to the plaintiffs lawsuit or fails to appear in court at the hearing or trial date. (2) Judgment issued by the court against the ...
Legally proper instrument under seal that transfers title to real property from the seller to buyer. ...
Net amount of cash than an investor requires from an income-producing property, after taxes, for a period of time, usually a year. It is computed by accumulating all rental receipts for the ...
When we talk about adverse environmental impacts, we always refer to the man-made negative impact on the environment. An adverse environmental impact can be defined as negative changes that ...
Platform erected on a roof in some New England homes having a view of the sea. It was said widows of lost seaman would walk on the platform looking out at sea for their husbands to return ...
Have a question or comment?
We're here to help.