Default

Definition

Default is the failure to meet the legal obligations (or conditions) of a loan, for example when a home buyer fails to make a mortgage payment, or when a corporation or government fails to pay a bond which has reached maturity. Default can result in serious consequences, such as damage to credit and asset seizure.

Example

If you stop making your car loan payments for several months (typically 90-120 days), your loan goes into default. The lender can then legally repossess the vehicle.