A promissory note is an unconditional promise to pay. Debentures (a bonds backed only by the reputation of the issuing company), MORTGAGEs, BONDS, and notes (promises to pay debt) are examples of promissory notes. The borrower is the maker of the note, and the lender is the payee. For the maker, the promissory note is a note payable; for the payee, it is a note receivable. The maker will incur interest expense over the life of the note, while interest INCOME will accrue to the payee. The note has a due date or maturity date, at which time the principal and interest must be repaid. Regardless of what may have happened during the life of the note or what events may occur on the maturity date, the note must be repaid on its due date, unconditionally. Notes that are not repaid at their maturities are defaulted notes, and they can damage the borrower’s reputation and ability to borrow in the future. Because promissory notes have maturity dates, holders of these notes must wait until the notes mature before they can collect on them. If the notes are negotiable, however, they can be sold to an investor before their maturity dates, providing cash to the payee before the notes mature. This common occurrence is known as DISCOUNTING.