Unsecured vs Secured Notes

Last Updated: Jun 7, 2019

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If a borrower defaults on a Secured Note, the assets it has pledged as collateral can be sold to repay the note. With an Unsecured Note, the borrower does not pledge any assets as collateral, so it typically pays the lender a higher interest rate in order to compensate them for the increased risk. In the event of a default, the Secured Note is more likely to be fully repaid because of the collateral, while full repayment of the Unsecured Note is less certain.