Understanding the difference between senior and junior debt (subordinated debt) is essential.nnSenior DebtnnSenior debt is a type of debt that takes priority over other forms of debt in the event of bankruptcy or liquidation. If a company defaults on its loans, senior debt holders are the first to be repaid from its assets before any other creditors.nnBecause of this priority in repayment, senior debt is considered less risky than subordinated debt. Investors in senior debt are more likely to receive their money back in full compared to investors in subordinated debt. This priority makes senior debt an attractive option for lenders seeking a more secure investment.nnJunior DebtnnSubordinated or junior debt has a lower priority for repayment than senior debt in the event of a company's liquidation or bankruptcy. This means that if a company defaults on its debt obligations, senior debt holders are entitled to be repaid before junior debt holders receive any payment.nnJunior debt is considered riskier for investors because of its lower priority in the repayment hierarchy. As a result, junior debt typically carries higher interest rates to compensate for the increased risk.nnUnlike senior debt, which has a higher level of security and lower risk, junior debt offers the potential for higher returns but comes with greater uncertainty and potential losses. Ultimately, the key difference between junior and senior debt lies in their repayment priority in case of financial distress.