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Glossary term

Default

Definition

Default means failing to keep up your end of a loan agreement — usually by missing payments — which can lead to serious consequences.

Technical definition

Default is the failure to satisfy the terms of a loan agreement, including non-payment or violation of covenants, which may trigger remedies such as acceleration or collateral seizure.

Why it matters

Default can damage credit and put pledged collateral at risk. Communicating early with a lender about trouble is generally better than missing payments silently.

Example

Repeatedly missing scheduled payments on an operating loan could place the loan in default under its terms.

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