What is a Default Rate?
A default rate is simply defined as the rate at which borrowers default on their loans. It is one of the most critical pieces of information, especially for lenders who may be saddled with significant losses in the event of a default. A default rate can be applied in the context of personal loans or business loans. The default rate is especially critical when dealing with credit cards. Many times, because this is unsecured debt, an individual may be quicker to default on this type of loan than others, which could cause the loss of a home or automobile. Also, credit cards can be used to purchase nearly anything and therefore may become the main way for a person to buy goods and services once in financial difficulty. This just compounds the problem and the risk of being unable to pay back. Investors and market analysts may also look at the default rate as a sign the economy is slowing down. When the economy slows, and businesses and individuals still have the same amount of debt, it may
Your Annual Percentage Rate may vary if you default under any Card Agreement that you have with us, because you fail to make a payment to us when due, you exceed your credit line, or you make a payment to us that is not honored by your financial institution. In such circumstances, we may increase your Annual Percentage Rate (including promotional rates) on all balances to a default rate of 15.76%.
