Default
The failure to live up to the terms of a contract. Generally, default is used to indicate the inability of a borrower to pay the interest or principal on a debt when it is due.
If a person or institution responsible for repaying a loan or making an interest payment fails to meet that obligation on time, that person or institution is in default.
If you are in default, you may lose any property that you put up as collateral to get the loan. For example, if you fail to repay your car loan, your lender may repossess the car.
Defaulting has a negative impact on your credit history and your credit score, which generally makes it difficult to borrow again in the future. In fact, failure to pay on time is the single most important contributor to a poor credit history.
A bond issuer who defaults may not pay interest when it comes due or repay the principal at maturity, or both. The failure to meet one's obligations in a timely manner.
There are several important concepts relating to defaults in the real estate field:
- Leases and mortgages often differentiate between monetary defaults, such as failure to pay money when due, and nonmonetary defaults such as a failure to provide proof of insurance or copies of monthly financial statements. If so, there will be different notice provisions and grace periods for each
- Unless a sale contract contains language that “time is of the essence,” or one party has made the other aware that time is critical, then a court will ordinarily award a purchaser a reasonable amount of time to complete closing, even if it is past the contract date.
Lenders usually view borrowers delinquent 90 days or more as in default.
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