Debt Term

When you have not paid a lender the amount due on a date specified in the loan agreement, you are “in default,” or you have “defaulted” on the loan. More generally default is the legal term to describe when one party to an agreement has failed to do what they said they were going to do, according to the agreement – such as pay on time, or keep certain financial ratios within bounds. Or alternatively you can default by doing things you said you were not going to do, such as seek additional debt financing without asking permission of the current lender.

Don Gooding

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