Borrower Default

Borrower default refers to a situation where a borrower fails to make their required loan payments as agreed upon in the loan contract. It occurs when the borrower becomes delinquent and stops making timely payments of principal, interest, or both.

When a borrower defaults, the lender may take legal action to recover the owed amount, which can include repossessing collateral (in secured loans), pursuing a court judgment, or reporting the default to credit bureaus. This can significantly damage the borrower’s credit score, making it difficult to obtain future credit.