Underwriting is an agreement whereby an institution or individual is willing to pay for or incur a financial risk in exchange for remuneration. This process sees an underwriter guarantee a minimum price for a certain number of corporate securities to the issuer. Once this agreement is struck, the underwriter bears all the risk of selling the underlying securities above the agreed minimum price, along with the costs of holding those securities on their books. These risks typically involve insurance, loans, and investments.
Unsecured debt is debt that is not secured against any underlying asset. This type of debt is high risk for lenders, as they have no right to seize particular items of property should the debtor default on a loan. Instead, they may have to sue the debtor for repayment of the full loan amount. Examples of unsecured debt include credit card debt, medical bills, and any other credit agreements that require no form of collateral from the borrower.
- Usury Rates
Usury rates are interest rates which are unreasonably higher than current market rates or above the rate of interest set by state statutes. It is illegal for a lender to charge interest rates that are above the rate permitted by state law. If a lender commits usury, then the interest that they are due will become void, and the borrower will only need to repay the loan principal. Usury rates usually apply to unsecured loans, with lenders often taking advantage of vulnerable or unsuspecting borrowers.