When is a loan in default (for borrowers)
What does ‘default’ actually mean?
A loan enters default when the borrower fails to meet the agreed terms of their loan agreement. This typically involves missing interest payments or failing to repay the capital at the end of the loan term.
At FOLK2FOLK, we understand that life and business don’t always go to plan. A default doesn’t mean instant legal action, but we do need to work to resolve the situation and open communication between us and the borrower is always the best route.
Common triggers of a default
A loan might be considered in default if:
- Monthly interest payments are missed or delayed beyond a reasonable tolerance.
- The capital isn’t repaid at the end of the agreed loan term.
- Terms of the agreement are breached.
- Material adverse changes occur that significantly affect the security or borrower’s financial position. Each situation is assessed on a case-by-case basis and it’s important for us to have open communication with borrowers to understand what’s going on.
What happens next?
We prefer to work collaboratively and constructively with borrowers, identifying and exploring all potential repayment options. However, if these options aren’t viable, we may begin recovery proceedings which may involve taking steps to realise the security property to repay the loan.
Can I talk to someone?
Absolutely. If you’re experiencing financial pressure or worried about missing a payment, we strongly encourage you to get in touch as early as possible. The sooner we know, the more options we have to help you avoid default.
