Secured Debt/Unsecured Debt
Secured debt is a loan in which the borrower pledges some asset as collateral for the debt, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral, and if the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally loaned to the borrower.
Unsecured Debt
Unsecured debt is a loan that is not backed by an underlying asset. This type of debt presents a high risk for lenders, also referred to as the creditor, since they may have to sue for repayment if the borrower doesn't repay the full amount owed. Generally speaking, secured debt may attract lower interest rates than unsecured debt because of the added security for the lender; however, credit risk (e.g. credit history, and ability to repay) and expected returns for the lender are also factors affecting rates.
Senior Debt/Junior Debt
Senior debt is debt with the highest priority of repayment.
Senior debt is borrowed money that a company must repay first if it goes out of business.
Each type of financing has a different priority level in being repaid if the company goes out of business. If a company goes bankrupt, the issuers of senior debt, which are often bondholders or banks that have issued revolving credit lines, are most likely to be repaid, followed by junior debt holders, preferred stock holders and common stock holders, possibly by selling collateral held for debt repayment.
Junior debt is debt that has a lower priority for repayment than other debt claims in the case of default.
When a company goes bankrupt, junior debt is low on the repayment chain. Since it is subordinate, it means that the loan will most likely not be paid back if the company goes bankrupt, and other debts that are of higher importance will be paid back first.
Preferred Debt
Preferred debt is a financial obligation that is considered more important or has priority over other types of debt. This form of debt obligation has to be paid first. Its lien position takes precedence over other debt and equity positions. For example, a first mortgage would be a preferred debt over a second mortgage or a mortgage-backed security holding the mortgage.
Interest from preferred debt is tax deductible. The main types of preferred debt include interest on mortgages, equity loans and equity lines of credit.
We at Finveda Wealth Management Pvt. Ltd. advise our clients to invest the best products to achieve their financial goals through both Equity and Debt Markets, we sell all kinds of Bonds, FMP's, Liquid Funds, Short Term Funds, Credit Risk Funds etc and we are the one of the best financial advisors in Hyderabad and one of the top mutual fund advisors in Hyderabad.
Mutual Fund investments are subject to market risk kindly read all documents carefully before investing.
Mutual Funds Sahi Hai per Sahi Advisor Jaroori hai. For best Financial Advise contact Finveda Wealth Management Pvt. Ltd., one of the top financial advisors in Hyderabad.
