A default, in real estate definition, is the act of failing to pay the principal loan or even the interest before its due date. When the debtor misses their legal obligation of returning the loaned amount or paying the minimum amount of necessary fees, something such as a default happens.
Another case of a default is that one party in a futures contract is not able to meet their end of the bargain at the date stated in the agreement. It can either be failing to turn over the property or missing the settled amount.
With these definitions, it suffices to say that committing a default comes with consequences.
What happens after a default?
Mortgage debtors who fail to make payments on several accounts can have their properties taken away by the financial provider; i.e. banks and loan services. They may also be subjected to financial penalties and have their loan money reclaimed.
Even commercial properties are not exempted to this result. Businesses who have declared bankruptcy have their debts and loans on default. Therefore, banks and lenders may seize their assets and properties, including buildings, warehouses, and other commercial estates the business has. These properties will serve as payments in exchange for actual cash.
Additionally, having a default in one’s credit history creates a negative impact to the borrower’s overall credit report. It speaks volumes about his manner when it comes to paying debts. This may discourage loan providers from allowing him future loan applications.