An unsecured debt instrument is a type of fixed-income instrument that is not backed by collateral. It is backed only by the creditworthiness of the issuer (issuing entity). Unlike secured debt instruments, which depend on the collateral posted, unsecured instruments lack an additional layer of protection. However, the higher risk involved entails a bigger risk premium, and consequently a higher potential return.

Unsecured debt instruments involve a certain form of unsecured debt– any type of debt or general obligation that is not secured or protected by a guarantor, or collateralized by a lien on specific assets of the borrower for any case of a bankruptcy or liquidation or inability to meet the terms for repayment and settlement.

The main examples of unsecured debt instruments are:

• Commercial paper.
• Unsecured bonds.
• Debentures.
• Convertible notes.
• Capital notes.
• Credit cards (as unsecured loans).
• Personal loans (as unsecured loans).