when a company goes bankrupt or insolvent there is normally a chain or ranking of creditors who get paid in a specific order lenders of unsubordinated debt get paid out in full first by the company the majority of this type of debt is usually secured by collateral 
most loans from financial institutions and certain high grade debt securities such as mortgage bonds are deemed senior debt loans are also considered unsubordinated based on the balance and the length of time outstanding in comparison with other loans because senior debt has a relatively secure claim it is considered to be less risky as such it pays a lower rate of interest compared to other types of debt this means lenders are willing to compensate for lower borrowing rates by claiming a higher priority over a borrower s assets since they will be repaid first during a liquidation event because they come with some security unsubordinated debt lenders normally charge lower interest rates to their debtors after unsubordinated debt lenders are paid any remaining money goes to preferred stock holders subordinated debt followed by common shareholders types of unsubordinated debtexamples of unsubordinated debt include exchange traded notes etns collateralized securities and certificates of deposit cds collateralized securities such as mortgage backed securities mbs are structured with a number of tranches that bear different risks interest rates and maturities tranches with a higher claim on underlying assets are safer than junior tranches with a second lien senior tranches also have a higher credit rating than junior tranches and are paid first unsubordinated vs subordinated debtunsubordinated debt is the opposite of subordinated debt this type of debt vehicle is ranked below all senior debts of a company subordinated debt is also called junior debt and is subject to subordination in the event of default or bankruptcy 