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Trading and Investment Terminology


1. Default is the failure to repay a debt including interest or principal on a loan or security. 

2. A default can occur when a borrower is unable to make 

  • Timely payments
  • Misses payments
  • Avoids or stops making payments. 

3. Individuals, businesses, and even countries can fall prey to default if they cannot keep up their debt obligations. 

4. Default risks are often calculated well in advance by creditors.

For example:

If a borrower defaults on a mortgage, the bank can reclaim the home securing the mortgage. 

Also, if a borrower defaults on an auto loan, the lender can repossess the automobile.