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Default
Default is a situation in which an individual who owes money, a debtor, fails to meet the requirements of the loan repayment to the lender. Such a situation may arise when a debtor is not financially capable of meeting the debt or refuses to honor the obligation.
The words default, insolvency, and bankruptcy are often used interchangeably or are confused with one another. Default simply means that a debtor has not met their debt obligation. Insolvency indicates that the debtor does not have the financial means to meet the obligation. Bankruptcy refers to a legal financial finding mandating supervision of an individual's finances oftentimes because they are in default, are insolvent, or both.
Instances of default have a decided negative impact on an individual's credit record or history and will be strongly considered by lenders in any future applications to take on additional debt via any kind of loan or credit.
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