Unsecured debt

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Securities
Vereinigte Ostindische Compagnie bond.jpg

Securities
Bond
Stock
Investment fund
Derivative
Structured finance
Agency security

Markets
Bond market
Stock market
Futures market
Foreign exchange market
Commodity market
Spot market
Over-the-counter market (OTC)

Bonds by coupon
Fixed rate bond
Floating rate note
Zero-coupon bond
Inflation-indexed bond
Commercial paper
Perpetual bond

Bonds by issuer
Corporate bond
Government bond
Municipal bond
Pfandbrief
Sovereign bond

Equities (stocks)
Stock
Share
Initial public offering (IPO)
Short selling

Investment funds
Mutual fund
Index fund
Exchange-traded fund (ETF)
Closed-end fund
Segregated fund
Hedge fund

Structured finance
Securitization
Asset-backed security
Mortgage-backed security
Commercial mortgage-backed security
Residential mortgage-backed security

Tranche
Collateralized debt obligation
Collateralized fund obligation
Collateralized mortgage obligation

Credit-linked note
Unsecured debt
Agency security

Derivatives
Option
Warrant
Futures
Forward contract
Swap
Credit derivative
Hybrid security

 v  d  e 

In finance, unsecured debt refers to any type of debt or general obligation that is not collateralised by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation.

In the event of the bankruptcy of the borrower, the unsecured creditors will have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors, although the unsecured creditors will usually realize a smaller proportion of their claims than the secured creditors.

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.

[edit] Examples

Also called signature loans or personal loans. These loans are often used by borrowers for small purchases such as computers, home improvements, vacations or unexpected expenses.

An unsecured loan means the lender relies on your promise to pay it back. They're taking a bigger risk than with a secured loan, so interest rates for unsecured loans tend to be higher. You normally have set payments over an agreed period and penalties may apply if you want to repay the loan early. Unsecured loans are often more expensive and less flexible than secured loans, but suitable if you want a short-term loan (one to five years).[2]

In the UK there are hundreds of different unsecured loans to choose from, so comparison tables have become a popular way of finding out about the different options available. In 2006, according to the Bank of England, 22% of UK households had some unsecured debt with a further 21% having both secured and unsecured debt.[3]

[edit] See also

[edit] References

Personal tools
Namespaces
Variants
Actions
Navigation
Interaction
Toolbox
Print/export
Languages