What is unsecured bond?

An unsecured bond is a type of bond that does not have any collateral backing it up. That means if the person or organization issuing the bond defaults on its payments, the bondholder does not have any assets to seize to repay the bond. Instead, the bondholder relies solely on the creditworthiness of the issuer to receive their interest payments and repay their principal at maturity. Because of this risk, unsecured bonds typically have higher interest rates than secured bonds. However, unsecured bonds are often seen as a reliable investment opportunity for investors who are confident in the issuer's financial stability and ability to make timely payments. Some common types of unsecured bonds include corporate bonds, municipal bonds, and government bonds.