An occurrence that allows a creditor (lender) to identify a debtor’s (borrower’s) unlikeliness to timely pay (obligations: interest and principal), or delinquency (a 90-day pas due). Generally, default is defined as the complete or partial failure to make contractual interest or principal repayments on a debt (a loan, a security, etc). Indications of such potential occurrences should be identified and implemented by a creditor entity in a way that guarantees a timely detection of credit events that precipitate disrupted cash flows or eventual cash shortfalls.

Events of default, common in lending agreements or debt instruments, prompt lenders to scrap the facility and/ or opt for acceleration where all amounts a borrower owes would immediately fall due and become payable or payable on demand.