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. Investopedia Says:
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. Related Terms:
Collateral
Commercial Paper
Creditor
Debenture
Default
Loan
Unsecured Loan |