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When a bond isn't backed by collateral or security of some kind, such as a mortgage, that can be used to repay the bondholders if the bond issuer defaults, the bond is described as unsecured.
However, most unsecured bonds pose limited risk of default, since the companies that issue them are usually financially sound. Unsecured bonds are also known as debentures.
- Browse Related Terms: Bearer bond, Coupon, Debenture, Junior security, Registered bond, Revenue bond, Subordinated debt, transfer agent, Unsecured bond