Obligor

An obligor is an individual or entity that is legally bound to fulfill a financial or contractual obligation. This typically involves the responsibility to pay a debt, perform a service, or provide something of value as agreed upon in a contract or legal agreement. The obligor has a specific duty, imposed by law, to act in a certain way or face potential consequences for failure to comply. The nature of the obligation, the timeline for fulfillment, and the consequences of default are usually clearly stipulated in the underlying agreement.

Obligor meaning with examples

• When securing a home loan, the borrower becomes the obligor, legally responsible for repaying the principal amount plus interest, as stated in the mortgage agreement. Failure to make timely payments allows the lender to foreclose on the property. The obligor is expected to make all payments in full and on time, as a breach of the agreement can have significant financial consequences.
• In the event of a bond issuance, the issuing corporation serves as the obligor, pledging to pay the bondholders the face value of the bond upon maturity, alongside periodic interest payments. The financial health and credit rating of the obligor are of significant concern to the bondholders, as these factor into the likelihood of them fulfilling their commitment.
• Under a lease agreement, the tenant is the obligor, bearing the responsibility of making timely rent payments and adhering to other stipulated terms, like maintaining the property. The obligor is legally committed to following the lease terms, and breaching this contract could result in eviction, or the forfeiture of security deposits.
• A guarantor, acting as the obligor, assumes the responsibility of covering a debt or fulfilling an obligation if the primary debtor defaults. If the borrower can't meet his debt obligations, the guarantor, also known as the obligor, is legally bound to assume the debt and take responsibility of paying it off or resolving the debt.