In finance, unsecured debt refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.
In the event of the bankruptcy of the borrower, the unsecured creditors will have a general claim on the assets of the borrower after the specific pledged assets have been assigned to the secured creditors. The unsecured creditors will usually realize a smaller proportion of their claims than the secured creditors.
In some legal systems, unsecured creditors who are also indebted to the insolvent debtor are able (and in some jurisdictions, required) to set-off the debts, which actually puts the unsecured creditor with a matured liability to the debtor in a pre-preferential position.
Under risk-based pricing, creditors tend to demand extremely high interest rates as a condition of extending unsecured debt. The maximum loss on a properly collateralized loan is the difference between the fair market value of the collateral and the outstanding debt. Thus, in the context of secured lending, the use of collateral reduces the size of the “bet” taken by the creditor on the debtor’s creditworthiness. Without collateral, the creditor stands to lose the entire sum outstanding at the point of default, and must boost the interest rate to price in that risk. Where high interest rates are considered usurious, unsecured loans are either not made at all, or are made by loan sharks unafraid of the law.
Oftentimes Unsecured Loans are sought out in cases where additional capital is required although existing (but not necessarily all) assets have been pledged to secure prior debt. Secured lenders will more often than not include language in the loan agreement that prevents debtor from assuming additional secured loans or pledging any assets to a creditor.
Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process of individuals addressing high consumer debt but occasionally refers to a country’s fiscal approach to corporate debt or Government debt. The process can secure a lower overall interest rate to the entire debt load and provide the convenience of servicing only one loan.
Johnstown is a city and the county seat of Fulton County in the U.S. state of New York. As of the 2010 Census, the city had population of 8,743. The city was named after its founder, Sir William Johnson.
The city of Johnstown is mostly surrounded by the town of Johnstown, of which it was once a part when it was a village. Also adjacent to the city is the city of Gloversville. The two cities are together known as the “Glove Cities”. They are known for their history of specialty manufacturing. Johnstown is located approximately 45 miles (72 km) west of Albany, about one-third of the way between Albany and the Finger Lakes region to the west.
Johnstown, originally “John’s Town”, was founded in 1762 by Sir William Johnson, a Baronet who named it after his son John Johnson. William Johnson came to the British colony of New York from Ireland in 1732. He was a trader who learned American Indian languages and culture, forming close relationships with many Native American leaders. He was appointed as the Superintendent of Indian Affairs, as well as a major general in the British forces during the French and Indian War (Seven Years’ War). His alliances with the Iroquois were significant to the war.
As a reward for his services, Johnson received large tracts of land in what are now Hamilton and Fulton counties. He established Johnstown and became one of New York’s most prosperous and influential citizens. He was the largest landowner in the Mohawk Valley, with an estate of more than 400,000 acres (1,600 km2) before his death. Having begun as an Indian trader, he expanded his business interests to include a sawmill and lumber business, and a flour mill that served the area. Johnson, the largest slaveholder in the county and perhaps in the state of New York, had some 60 enslaved Africans working these businesses. He also recruited many Scots-Irish tenant farmers to work his lands. Observing Johnson’s successful business endeavors, the local Native American inhabitants dubbed him Warragghivagey, or “he who does much business.”