Definition:
When a person or organization which is responsible for repaying a debt fails to make payments according to the contract governing the debt, that person or organization is considered to be in default. When in default, the lender has certain rights to the collateral that was put up to back the loan and/or the item for which the loan was procured. Defaulting is a huge negative on a credit report and should be avoided as far as is possible. Even late (delinquent) payments can put a person into default because the terms of the loan contract aren't being fulfilled. Default applied to any type of loan, whether a home mortgage, car loan, or a municipal or government bond: the contract specifies payment terms, and if they're not met the entity in question is in default.
