Borrowers

A borrower is a person or organization that obtains a loan or other form of credit from a lender with an agreement to repay the principal and interest. Borrowers may use funds for consumption, investment, or operational needs. The term is often contrasted with lender and creditor; the act of borrowing creates a debtor-creditor relationship and typically involves a formal contract.

Common borrower categories include individuals taking consumer loans or mortgages, corporations issuing debt or obtaining credit lines, and governments issuing bonds. Borrowing arrangements can be secured by collateral (such as a home or equipment) or unsecured, and can be structured as fixed-term loans, lines of credit, or revolving credit.

The borrowing process usually involves a loan application, a credit evaluation or underwriting, and the negotiation of terms such as interest rate, fees, repayment schedule, and maturity. Repayment obligations may be fixed installments or variable; failure to comply can lead to default, collection actions, or bankruptcy. Interest rate depends on creditworthiness, collateral, market rates, and risk.

Creditworthiness is commonly measured by credit scores, credit reports, income, debt-to-income ratio, and payment history. Lenders use these indicators to assess risk and pricing. Borrowers are subject to legal protections and regulators may impose disclosure requirements and limits on lending practices, such as usury laws and fair lending rules.

In macroeconomics, borrowing by households, firms, and governments supports investment and spending but can contribute to financial vulnerability if debt becomes excessive. Proper risk management and regulatory oversight aim to balance access to credit with repayment capacity.