Definition of Unsecured creditor:
An unsecured creditor is an individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan. If a borrower fails to make a payment on a debt that is unsecured, the creditor cannot take any of the borrower's assets without winning a lawsuit first.
Creditor who extended credit to a debtor without a collateral security. If the debtor files for bankruptcy or is levied upon, the unsecured creditors are paid on a pro-rata basis only after the claims of all secured creditors are satisfied.
A debenture holder is an unsecured creditor.
How to use Unsecured creditor in a sentence?
- Usually, bankruptcy is the only option for unsecured creditors if the borrower defaults.
- Secured creditors often require collateral in the event the borrower defaults.
- Unsecured creditors can range from credit card companies to doctor's offices.
Meaning of Unsecured creditor & Unsecured creditor Definition