A PIK loan — Payment in Kind loan — is a debt instrument where the borrower pays interest not in cash but by issuing additional debt. Instead of writing a check for interest each quarter, the borrower adds the interest to the outstanding principal balance. The lender receives more paper; the borrower preserves cash. What It Is In conventional lending, interest is paid periodically in cash. PIK flips this. The borrower’s interest obligation accumulates as additional loan principal, which itself accrues further interest in subsequent periods.

Toggle notes are a hybrid debt instrument that allows the issuer to pay interest either in cash or by issuing additional debt — toggling between the two modes, typically on a period-by-period basis. The toggle is a contractual right, not a default. The issuer elects how to pay; the election itself does not constitute a breach. What They Are Toggle notes combine features of conventional cash-pay bonds and PIK (Payment in Kind) instruments.