Unsecured Note

A loan that is not secured by the issuer's assets. Unsecured notes are similar to debentures but offer a higher rate of return with less security than a debenture. Such notes are also often uninsured and subordinated. The note is structured for a fixed period of time. 




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Companies sell unsecured notes through private offerings to generate money for corporate initiatives such as share repurchases and acquisitions. An unsecured note is not backed by any collateral and therefore presents the most risk to lenders (investors in the notes). Due to the higher risk involved, the interest rates on these notes are higher than with secured notes.