What Is A Default?

Default is the technical definition of when any borrower fails to make a payment on their debt. This can be failure to pay interest or principal, and can be any amount. Default is usually a sign of financial difficulty and the lender losing money. The lender often asks for collateral on the loan so in the event of default, they can claim the collateral to cover their losses. A default can be classified as a technical default (when the terms of a loan agreement are broken but the payments are still made) or actual default (when payments are not made).

To learn more about this concept and become a master at bonds and fixed income, you should check out our Bond Course - Fixed Income (coming soon!).

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