Unsecured Debt

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What is Unsecured Debt?

Unsecured debt refers to debt that is not backed by any collateral. Instead, lenders consider a borrower’s eligibility to take the debt based on their cash flow, their creditworthiness and financial history. Unsecured debt is considered riskier than its secured debt counterpart since if a startup defaults on their debt, assets can’t be seized to pay the debt without a court order.

Unsecured Debt Examples

Examples of unsecured debt attributions:

  • Example 1. Associated with higher interest rates
  • Example 2. Unsecured debt can be waived in a bankruptcy
  • Example 3. Lenders can report negative payment history to credit bureaus

Here’s another web page about unsecured debt.

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