What Is a Loan Default?

By Jason Hall – Updated Nov 19, 2025 at 12:38 AM

Key Points

Defaulting on a loan severely damages your credit score and may cause total loan repayment demand.
Secured loan defaults can lead to asset seizure; proactive lender communication may prevent it.
Federal student loan defaults are recoverable through full payment, rehabilitation, or consolidation.

When you stop making payments on a loan, the loan is in default. What exactly that means, and what happens next, can vary based on the kind of loan and the lender. But in general, it means that your credit score is going to take a big hit, and the entire amount of the loan generally is due in full.

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Bills stamped Past Due and Account Closed. — Image source: Getty Images

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About the Author

Jason Hall is a contributing Motley Fool stock market analyst with more than a decade of experience writing about dividend stocks and long-term investing. He has been with the company since 2012 and previously spent over 10 years in technical sales in the printing and information services industry. Jason also founded and operated a small food manufacturing business.

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