Creditors: Definition, Types, Functions, and Legal Protection

A creditor is an attempt to lend an object belonging to someone to another person who makes a loan. Credit business does have a high risk when creditors need to give their property rights to other people to lend.

Even so, the guarantee given should have a value that is as important as the loan made by the debtor, there is various information about the creditor that you can understand more clearly in the following article.

Definition of Creditor

A creditor is a party involved in an activity in which a person gives a loan to another person (the debtor) and it will be returned (by the debtor) in accordance with the agreement agreed upon at the outset. Usually this lending process is also coupled with loan interest requirements, namely fees as a sign of remuneration for loans provided by creditors to debtors according to laws and regulations in the financial sector

Loans given by creditors to debtors are made in the form of agreements. Based on Law No. 41 of 2023 regarding value added tax on the delivery of collateral by creditors, creditors are defined as financial institutions that provide credit or loans on the basis of statutory provisions in the financial sector.

Types of Creditors

Creditors have several types that can differentiate roles from one another, even though in essence the creditor is the party that provides the loan. But these types of creditors will help how a creditor is viewed in civil law, here's an explanation:

1. Concurrent Creditors

Is a type of creditor who has the right to be able to collect loans provided in accordance with the agreement that has been set with the creditor. This type of creditor can obtain loan repayment without any precedence and is calculated by the amount of receivables against all of the debtor's assets.

2. Preferred Creditors

Is a type of creditor who has the right in law to get loan repayment first. In law, this type of creditor gets privileges that place the creditor as a higher party than the borrower.

3. Separatist Creditors

Is a type of creditor who has collateral rights in law regarding guarantees provided by the debtor with the terms lien and mortgage. This type of creditor has an important right because it has the authority to resell the goods provided by the debtor as collateral without a court decision, when the debtor is unable to repay the loan in accordance with the agreement agreed at the beginning.

Creditor Function

Credit activities have various benefits related to debts through mutual agreements. In the process, creditors are often misunderstood with a negative view because they provide remuneration to borrowers, even though it seems that creditors have a number of useful functions or roles in businesses or individuals. Here are a number of functions that you can find out from the presence of a creditor:

1. Creditors function as parties or organizations that provide lending services to debtors who need additional funds 
2. Creditors help provide opportunities for debtors, especially for business people who are starting their businesses and need business capital
3. Creditors have a role function as parties who can provide loans when a business or company experiences a crisis and requires financial assistance by providing guarantees
4. Creditors also have the function of being able to turn on the community's economic cycle, because this loan service can be used by the community by providing guarantees as emergency or urgent funds for the cost of necessities of life, for example additional costs for hospitals, educational costs, installment costs and so on.

The function of a creditor in society has multiple interpretations depending on the needs and interests of the debtor in making a loan. A person can make a loan for certain reasons, including personal reasons.

Legal Protection for Creditors

Creditors are one of the tasks that have big challenges, because not only giving loans to other people but also how creditors can maintain their rights to the funds that have been lent.

Creditors themselves in Article 23 paragraph (2) of the Fiduciary Law, it is explained that they have rights and rules in providing loans legally. A creditor needs to have a guarantee that his funds or goods can be returned to him intact or with an equivalent value, therefore a guarantee agreement is needed between the creditor and the debtor.

Legal protection for creditors can be done by registering a fiduciary guarantee, namely transferring ownership rights to another person even though the object is still the main or first owner. Fiduciary guarantees can provide legal protection to creditors, where protection is given to creditors who are given preferential rights over receivables or usufructuary rights over the objects used.

Fiduciary guarantees must be legally registered in order to fulfill the principle of publicity, which is one of the principles in the law of material guarantees. This is done as a guarantee for the creditor that the object is indeed his.

Fiduciary guarantees must be registered, as stipulated in article 11 of the UUJF. With this registration, UUJF fulfills the principle of publicity which is one of the main principles of material guarantee law.

It takes a form of accountability for both parties to be able to act in accordance with the mutually agreed agreement. That's all the explanation regarding the definition of a creditor to its legal protection, I hope this information can help you.