what is a debenture 
a debenture is a type of bond or other debt instrument that is unsecured by collateral since debentures have no collateral backing they must rely on the creditworthiness and reputation of the issuer for support both corporations and governments frequently issue debentures to raise capital or funds investopedia candra huffunderstanding debenturessimilar to most bonds debentures may pay periodic interest payments called coupon payments like other types of bonds debentures are documented in an indenture an indenture is a legal and binding contract between bond issuers and bondholders the contract specifies features of a debt offering such as the maturity date the timing of interest or coupon payments the method of interest calculation and other features corporations and governments can issue debentures governments typically issue long term bonds those with maturities of longer than 10 years considered low risk investments these government bonds have the backing of the government issuer corporations also use debentures as long term loans however the debentures of corporations are unsecured 1 instead they have the backing of only the financial viability and creditworthiness of the underlying company these debt instruments pay an interest rate and are redeemable or repayable on a fixed date a company typically makes these scheduled debt interest payments before they pay stock dividends to shareholders debentures are advantageous for companies since they carry lower interest rates and longer repayment dates as compared to other types of loans and debt instruments types of debentures