unsecured debt

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

  • Debt is usually granted with expected repayment.
  • 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.
  • Treasury bills are one kind of debt issued by the U.S.

• 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.

• Agency

  • Mezzanine capital: A subordinated debt or preferred equity instrument that represents a claim on a company's assets, which is senior only to that of the common shares.
  • Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock.

• 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.

• Types of Bonds

  • This is an unsecured bond backed only by the general creditworthiness of the issuer, not by a lien on any specific property.
  • Warrants issued with long-term debt may be nondetachable or detachable.
  • Some issuers declared bankruptcy or sought relief from the bondholders by negotiating new debt terms.
  • Differentiate be the various types of bonds including secured and unsecured, registered and unregistered and convertible

• 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.

• Long-Term vs. Short-Term Financing

  • The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date.
  • Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date.
  • Many times, capital notes are issued in connection with a debt-for-equity swap restructuring: instead of issuing the shares (that replace debt) in the present, the company gives creditors convertible securities – capital notes – so the dilution will occur later.
  • This is an unsecured promissory note with a fixed maturity of 1 to 364 days in the global money market.
  • It is issued by large corporations to get financing to meet short-term debt obligations.

• 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.