In the relationship between a borrower and a lender, default means one or more of the following.
- The borrower has failed to make payments as agreed.
- The borrower has failed to meet covenants (terms and conditions) of the lending agreement.
- The borrower has failed to take steps to address either of the above.
The first two are indicators of default. If the third is true, the lender may take steps to reduce losses by pursuing legal or other action to collect what it is owed.