Default is a term used in the loan borrowing process and occurs when a borrower fails to meet the payment terms of a loan or credit agreement. This, in most cases, happens when payments are missed for an extended period. Defaulting on a loan can have severe financial consequences, such as damage to the borrower’s credit score, added fees, and even legal action. In cases where there is collateral, like a house or car, the lender may take possession of it. Defaulting can make it harder to get credit in the future.