Definition and Examples of Loan Default What Is Defaulting on a Loan? What Happens if You Default on a Loan? Defaulting on a loan is a failure to make payments for an extended period of time. Learn about the implications and what to do if it happens to you.
What happens if a lender defaults on a loan?
In many agreements, the lender will include a contract provision covering events of default to protect itself in case it appears that the borrower will not be able or does not intend to repay the loan in the future. An event of default enables the lender to seize any collateral that has been pledged and sell it to recoup the balance of the loan.
How quickly do you default on a loan?
How quickly you default can vary greatly depending on the type of loan and the lender. When you miss a single monthly payment, many lenders will allow your loan to go into a delinquency phase. In this delinquency period, you’ll have time to avoid defaulting on your loan.
