Home › Finance › Debt, Loans & Bankruptcy › default

default

dih-FAWLT /dɪˈfɔːlt/

nounverbB2GREGMAT

formalfinancelegal

Noun: Failure to fulfill an obligation, especially to repay a loan or appear in a court of law. Verb: To fail to fulfill an obligation, especially to repay a loan.

In finance, it specifically means failing to make a required payment on a loan or debt. It has serious consequences, often leading to penalties, legal action, or loss of collateral.

The story behind the word. The word 'default' comes from the Old French 'defaillir,' meaning 'to fail, to be lacking.' This is derived from the Latin 'de-' (meaning 'away' or 'down') and 'fallere' (meaning 'to deceive, to fail'). So, to 'default' is to 'fall away' from one's obligations or to 'fail' to meet them.

Word relationships

fail: Broader term; 'default' is a specific type of financial or legal failure.
renege: To go back on a promise or contract.
non-payment: The act of not paying, often leading to default.

repay: To pay back a loan or debt.
fulfill: To carry out or satisfy an obligation.

Commonly confused with

arrears: 'Arrears' means payments are overdue; 'default' is the formal failure to meet obligations, often after a period of arrears.

Word family

defaulter (noun): A person who defaults on an obligation.

Collocations

default on a loan
default risk
technical default
payment default
go into default

Idioms & expressions

by default (as a result of a lack of any alternative)

Example sentences

"If too many borrowers default on their mortgages, it could trigger a housing crisis." A bank's concern.
"The company was forced into bankruptcy after a default on its bond payments." Legal consequences.
"The risk of sovereign default increased as the nation's economy deteriorated." From a financial analyst's report.

Memory hook

When you 'default,' you 'fall' short of your payments. Fall short

When not to use

While 'default' can mean a general failure, in a financial context, it specifically refers to failing to meet a payment obligation. Do not use it for minor oversights that don't violate a contract.

Fun facts

The term 'default' also has a non-financial meaning, referring to a preselected option or setting, as in 'the default font.' This comes from the idea of what happens 'by default' if no other action is taken.