default

Example

“After missing three mortgage payments, they were at risk of default.”

Memory Tip

DE-fault — when you're at fault for not paying. The 'de' means you've fallen from your obligation.

Why It Matters

Default can severely damage your credit score, making it harder and more expensive to borrow money in the future. Understanding default helps you prioritize payments and avoid long-term financial consequences that can affect your ability to get loans, mortgages, or even rent an apartment.

Common Misconception

Many people think default only happens after missing one payment, but typically lenders allow a grace period of 30 days or more before officially declaring an account in default. The exact timeline depends on the type of debt and the lender's terms.

In Practice

If you have a car loan for 25,000 dollars with a 500 dollar monthly payment and you miss three consecutive payments, your lender may declare you in default after 90 days. This can result in the vehicle being repossessed, a significant credit score drop, and legal action to recover the remaining balance plus fees.

Etymology

From Old French 'defaute' meaning 'failure, lack' — failing to do what was required.

Common Misspellings

Related Terms

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