unsecured debt

(noun)

Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.

Related Terms

Examples of unsecured debt in the following topics:

  • Corporate Bonds

    • The opposite of secured debt is unsecured debt, which is not linked to any specific piece of property.
    • In the case of unsecured debt, the absence of collateral means that the creditor may only satisfy the debt against the borrower.
    • The comparative security of secured debt for the lender generally results in lower interest rates for secured than for unsecured debt.
    • Senior debt, frequently issued in the form of senior notes and sometimes referred to as senior loans, is debt that takes priority over unsecured or junior debt owed by the issuer.
    • Subordinated debt is also unsecured and has a lower priority than any additional debt claim on the same asset.

  • Secured vs. Unsecured Funding

    • Debt refers to an obligation.
    • A loan is a monetary form of debt.
    • Generally speaking, secured debt may attract lower interest rates than unsecured debt due to the added security for the lender.
    • For the debtor, a secured debt may receive more favorable terms than that available for unsecured debt, or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all.
    • In some legal systems, unsecured creditors who are also indebted to the insolvent debtor are able (and in some jurisdictions, required) to set-off the debts, which actually puts the unsecured creditor with a matured liability to the debtor in a pre-preferential position.

  • Debt Finance

    • A company uses various kinds of debt to finance its operations .
    • The various types of debt can generally be categorized into:
    • Unsecured debt comprises financial obligations, where creditors do not have recourse to the assets of the borrower to satisfy their claims.
    • A basic loan or "term loan" is the simplest form of debt.
    • A company uses various kinds of debt to finance its operations.

  • Commercial Paper

    • Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations.
    • In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of one to 364 days.
    • Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or a corporation's promise to pay the face amount on the maturity date specified on the note.
    • Vertical scale shows debt in billions (thousands of millions) of dollars, horizontal scale shows years.
    • Vertical scale shows debt in millions of dollars, horizontal scale shows years.

  • Commercial Banks

    • ., a car or property) as collateral for it, which then becomes a secured debt owed to the creditor who gives the loan.
    • The debt is thus secured against the collateral.
    • Commercial banks may also provide unsecured loans, which are monetary loans that are not secured against the borrower's assets (i.e., no collateral is involved).
    • Some examples of unsecured loans include credit cards and credit lines.
    • An overdraft is an example of an unsecured loan.

  • Credit Operations

    • Lines of credit can be secured by collateral or may be unsecured.
    • However, unlike a term loan, revolving debt allows the borrower to draw down, repa,y and re-draw credit amounts advanced to her by the available capital during the term of the debt.
    • Repayment of revolving credit is achieved either by scheduled payments on the total amount of the debt over time, or by all outstanding loans being repaid on the date of termination.
    • The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan.

  • Short-Term Loans

    • A payday loan (also called a payday advance) is a small, short-term unsecured loan.
    • The basic loan process involves a lender providing a short-term unsecured loan to be repaid at the borrower's next pay day.
    • As a final debt financing to carry the company through the immediate period before an initial public offering or acquisition.

  • Debt Utilization Ratios

    • In this case, it has a debt ratio of 200%.
    • The debt ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt.
    • When used to calculate a company's financial leverage, the debt usually includes only the Long Term Debt (LTD).
    • D/E = Debt(liabilities)/Equity.
    • The debt service coverage ratio (DSCR), also known as debt coverage ratio (DCR), is the ratio of cash available for debt servicing to interest, principal, and lease payments.

  • Collection from Delinquent Payables

    • Debt compliance describes various legal measures taken to ensure that debtors honor their debts.
    • There are a number of repercussions for debt noncompliance.
    • This occurs when a consumer becomes severely delinquent on a debt.
    • Bad debts and even fraud are simply part of the cost of doing business.
    • Explain the ramifications of failing to repay credit card and loan debts

  • Long-Term Loans

    • Three common examples of long term loans are government debt, mortgages, and debentures (bonds).
    • Three common examples of long term loans are government debt, mortgages, and bonds or debentures .
    • Government debt (also known as public debt or national debt) is the debt owed by a central government.
    • Government debt is one of numerous methods of financing government operations.
    • A debenture is a document that either creates or acknowledges a debt, and the debt is one without collateral.