When is a loan considered to be in default?

A loan is considered to be in default typically when the borrower has failed to make any payments for a specified duration, which often aligns with the 90-day period mentioned in the chosen answer. This 90-day threshold is significant because it is often when lenders take more substantial action, such as initiating foreclosure processes or reporting the default to credit agencies.

In most lending agreements, a borrower is initially given a grace period for late payments, but if payments continue to be missed and reach a certain number—frequently set at 90 days—this indicates a serious level of non-compliance with the loan terms. During this time, the lender may explore options such as loan modification, but the default status denotes that the borrower is not adhering to the repayment terms as contracted.

The other options deal with criteria that might indicate missed payments or poor management (like being late on a payment or exceeding a credit limit), but they do not meet the widely accepted standard for default status. Default is usually categorized more seriously, which is why the 90-day non-payment period is critical.