Unsecured debt

In the case of a company or bank going into liquidation there are several levels of debt guarantee : secured, preferential and unsecured. The unsecured debts are last in line to be paid after the others have been paid in full, or as fully as possible. Depending on the assets remaining the unsecured creditors may receive a small percentage of what they are owed or even nothing at all ; this justifies a higher interest-rate when the companies borrow from unsecured and/or non-preferential creditors.