Event Of Default

AAA

DEFINITION of 'Event Of Default'

An action or circumstance that causes a lender to demand full repayment of an outstanding balance sooner than it was originally due. In many agreements, the lender will include a contract provision covering events of default to protect itself in case it appears that the borrower will not be able to or does not intend to continue repaying the loan in the future. An event of default enables the lender to seize any collateral that has been pledged and sell it to recoup the loan.

INVESTOPEDIA EXPLAINS 'Event Of Default'

Occurrences that may trigger an event of default include non-repayment of a loan at maturity, breach of contract and declaration of bankruptcy. Event of default clauses can be included not only in loan and lease agreements, but also in business agreements such as joint ventures and partnerships. Such a clause can allow the non-defaulting parties to exit a broken agreement.

RELATED TERMS
  1. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  2. Acceleration Clause

    A contract provision that allows a lender to require a borrower ...
  3. Reperforming Loan - RPL

    A loan on which the borrower was behind on payments (delinquent) ...
  4. Default Rate

    This rate can be used in reference to two main things: 1. The ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Cross Default

    A provisions in a bond indenture or loan agreement that puts ...
RELATED FAQS
  1. How did the financial crisis affect the oil and gas sector?

    The financial crisis had a negative impact on the oil and gas sector as it led to a steep decline in oil and gas prices and ... Read Full Answer >>
  2. What are some of the advantages and disadvantages of absorption costing?

    Companies must choose between using absorption costing or variable costing in their accounting systems. There are advantages ... Read Full Answer >>
  3. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
  4. Why does zero-based budgeting require ongoing evaluation and management?

    Zero-based budgeting must have ongoing evaluation and management due to the fact a zero-based budget requires management ... Read Full Answer >>
  5. What is the prime cost formula?

    The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >>
  6. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
Related Articles
  1. Personal Finance

    Spotting Companies In Financial Distress

    What are the warning signs that a company is struggling - or worse, sinking - financially? Read on to find out.
  2. Retirement

    Bankruptcy Protection For Your Accounts

    Will the plan assets you've worked hard for be safe if you experience a personal financial crisis?
  3. Retirement

    Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.
  4. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  5. Retirement

    What You Need To Know About Bankruptcy

    Don't choose this last-resort option until you learn how it will affect your future.
  6. Options & Futures

    Changing The Face Of Bankruptcy

    A 2005 law attempts to unmask fraudulent debtors and still save those who are struggling. Will it affect you?
  7. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  8. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  9. Investing Basics

    How Much Do CPAs Make?

    If you're considering becoming a CPA, here's what you might expect to earn.
  10. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center