unsecured creditor

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Unsecured Creditor

An individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because they have nothing to fall back on should the borrower default on the loan. A debenture holder is an unsecured creditor.

Notes:

It's uncommon for individuals to be able to borrow money without collateral. For example, when you take out a mortgage, a bank will always hold your house as collateral for the loan in case you default. Large corporations however often issue commercial paper that is unsecured.

unsecured creditor

A creditor with a claim for which no specific assets are pledged. A debenture holder is an unsecured creditor. Compare secured creditor.

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