What is the difference between a lender and a creditor?

A lender is a person or entity which loans money to another person or entity. A creditor is the person or entity to whom the borrower must repay the money. Sometimes, the lender and the creditor are the same entity, other times they are different entities. For example, if you get a loan from a bank and then owe the money to the bank, the bank is your creditor. But the bank can sell your debt to another entity, so now, while you borrowed from the bank, you owe the money to the new buyer of your loan who is now the creditor.

If you buy a home and obtain a mortgage to help pay for the price of the purchase, your mortgage loan is funded by a lender. Sometimes lenders keep these mortgages on their books, but more often the loan is “sold” by the lender to a professional investor entity that is now the creditor to whom you make the payments.

Mortgage creditors often employ payment processing companies that are known as “Servicers”. Servicers receive the payments you make, deposit the payments with the banks, and record the payment for your mortgage account on the books of the creditor. Servicers are sometimes also employed by auto loan creditors. Servicers handle the payments and record keeping for auto loan portfolios that are owned by private investor groups, as well as portfolios owned by auto finance companies or large banks.