Unsecured Debt

Unsecured Debt is debt that is not backed by specific collateral, meaning the lender relies primarily on the borrower’s general creditworthiness and has a lower priority claim than secured creditors in a liquidation. In capital structures, Unsecured Debt typically carries higher interest than secured debt to compensate for risk, and Unsecured Debt terms can include covenants and guarantees to mitigate the lack of collateral.