Unsecured debt

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In finance, unsecured debt refers to any type of debt or general liability that is not covered by the guarantor, or is secured by liens on certain assets of the borrower in case of bankruptcy or liquidation or failure. to meet the terms of repayment.

In the event of bankruptcy of the borrower, the unsecured creditors will have a general claim on the borrower's assets after the specified secured asset has been granted to the secured creditor. Unsecured creditors will usually be aware of the proportion of their claims that are smaller than the secured creditors.

In some legal systems, unsecured creditors who are also are indebted to a bankrupt debtor (and in some jurisdictions, required) to repay the debt, which actually places unsecured creditors with maturity obligations to the debtor in a pre-position -preferenceal.

Based on risk-based pricing, creditors tend to ask for very high interest rates as a condition to extend unsecured debt. The maximum loss on a secured loan is the difference between the fair market value of the collateral and the outstanding debt. Thus, in the context of secured loans, the use of collateral reduces the size of "bets" taken by creditors on the creditworthiness of debtors. Without a guarantee, the creditor will lose the entire amount in circulation at the default point, and should raise the interest rate to the price at that risk. Where high interest rates are considered usury, unsecured loans are not made at all, or made by loan sharks who are not afraid of the law.

Unsecured loans are often sought in cases where additional capital is required even though (but not necessarily all) assets have been pledged to secure previous debt. Guaranteed lenders will more often than not include the language in the loan agreement that prevents the debtor from assuming additional secured loans or pledging any assets to creditors.

Video Unsecured debt

National differences

Malaysia

In Malaysia, there are private loans for the private sector and for the government sector. Private loan interest rates for the private sector are always higher than the government sector due to lower risk for banks to lend to the government sector. The government will pay the salaries of civil servants through a payroll system known as the Bureau of Space and banks will reduce monthly installment of loans from civil servants salaries through this system, even before salaries are released. An example of this loan is a cooperative loan.

Interest rates for personal loans in Malaysia are affected by one of these factors: the loan amount, the loan period and the income of the applicant. In some cases, banks will take 2 or even 3 of these factors to decide on the appropriate interest rate to apply to personal loans. In 2013, the Malaysian Central Bank introduced a new maximum 10 year loan term for personal loans (the maximum loan period was 25 years).

Maps Unsecured debt

See also

• High yield debt
• Guarantee loan
• Medical debt
• Merchant advances
• Peer-to-peer lending
• Time deposits
• Credit card debt
• Personal loans

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References

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External links

Source of the article : Wikipedia