Also known as subordinated. The act of lowering the payment priority of a right or a claim with respect to another right or claim.

In financing transactions, subordination is an arrangement where a creditor (the junior creditor) agrees not to be paid by a borrower until another creditor (the senior creditor) is paid. Subordination means increased risk for the subordinated lender since it will have less access to the borrower's assets than senior lenders. Lenders may accept this risk if they are compensated for doing so. Consequently, interest rates on subordinated debt are higher than on senior debt.

As an example, a company's debt may consist of subordinated notes (or high-yield bonds) issued by the company which are subordinated to senior syndicated loans made to the company by lenders in a bank loan facility.