Dictionary

  • Unsecured debt

    A debt in respect of which the debtor has given no security over collateral property, which could be forfeited upon default to recoup the loan capital. The issuer of an unsecured debt is known as an unsecured creditor.

    A debt which is unsecured usually incurs higher interest rates in order to balance the risk level of the loan, e.g. a credit card debt.

    In the event that the recipient of the loan becomes bankrupt or insolvent, unsecured debts will be paid back at a low priority, and practically, this often means they are never fully repaid, or sometimes, not repaid at all (i.e. the creditor gets nothing).

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