What is “Default”?

Default is a term used to describe a situation where an individual, business or organization has failed to take the necessary action required to fulfill a legal obligation or contract. It can also refer to the failure to meet a financial obligation, such as a loan repayment or credit card payment. In either case, default can have significant consequences and should be avoided whenever possible.

How Does Default Occur?

Default typically occurs when an individual or business fails to make the agreed-upon payments on a loan, such as a mortgage, auto loan, or credit card balance. Default can also happen when someone misses a payment on a business contract. In most cases, a lender or creditor will send out a notice of default when the payment has been missed. If the individual or business continues to fail to make payments, the lender or creditor may pursue legal action.

Consequences of Default

Default can have serious consequences. It can impact an individual’s or business’s credit rating, making it more difficult to get approved for future loans or lines of credit. It can also result in a court judgement against the individual or business, as well as wage garnishment or bank account seizures. In some cases, creditors may even pursue legal action against an individual or business.

How to Avoid Default

The best way to avoid default is to always pay any bills or loan payments on time and in full. If an individual or business finds themselves unable to make a payment, it’s important to contact the lender or creditor immediately and discuss options for payment. Some lenders may be willing to negotiate a payment plan or provide other forms of assistance.


Default is a serious issue that should be avoided whenever possible. It can have significant financial and legal ramifications, so it’s important to stay on top of any loan or bill payments. If you find yourself unable to make a payment, the best course of action is to contact your lender or creditor and discuss your options. Relevant Links: