Default
Quick Definition
Failure to make required loan payments as agreed with the lender.
Full Explanation
A loan default occurs when a borrower fails to make required payments or violates other terms of the loan agreement. In Canada, most loans have a grace period before being declared in default, but once in default, lenders may demand immediate repayment of the full outstanding balance, report the default to credit bureaus (severely damaging your credit score), initiate collection actions, or seize collateral (for secured loans). Mortgage defaults can lead to foreclosure or power of sale proceedings. Defaults remain on your credit report for 6 years in Canada.
Related Terms
Credit Score
A 3-digit number (300–900) indicating your creditworthiness to lenders.
Collateral
An asset pledged to secure a loan, which the lender can seize if you default.
Secured Loan
A loan backed by collateral — an asset the lender can seize if you default.
Foreclosure
A legal process where a lender takes ownership of a mortgaged property after default.
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