Pay Later - ICICI Bank Initiative | ICICI Bank introduces ‘PayLater’, an instant Digital Credit Facility for Small Payments - ABP NEWS 247

Monday, 28 October 2019

Pay Later - ICICI Bank Initiative | ICICI Bank introduces ‘PayLater’, an instant Digital Credit Facility for Small Payments


Pay Later - ICICI Bank Initiative | ICICI Bank introduces ‘PayLater’, an instant Digital Credit Facility for Small Payments

Pay Later - ICICI Bank Initiative | ICICI Bank introduces ‘PayLater’, an instant Digital Credit Facility for Small Payments


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. That differs from secured debt such as a mortgage, which is backed by a piece of real estate, or gold in case of Gold Loan or other securities like Fixed Deposits, Shares or insurance papers.

In the event of the bankruptcy of the borrower, the unsecured creditors 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 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. If high interest rates are considered usurious, unsecured loans would otherwise not be made at all.

Unsecured loans are often sought out if additional capital is required although existing (but not necessarily all) assets have been pledged to secure prior debt. Secured lenders 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.


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