A defaulted loan occurs when a borrower fails to make the required payments on their loan for a specified period, typically 90 days or more. This situation can arise from various reasons, such as financial hardship or mismanagement of funds. When a loan defaults, the lender may take legal action to recover the owed amount, which can include seizing collateral or garnishing wages. Defaulting on a loan can have serious consequences for the borrower, including a significant drop in their credit score. This negative impact can make it difficult to secure future loans or credit, as lenders view defaulted loans as a sign of financial instability. Additionally, the borrower may face collection efforts from agencies or legal proceedings related to the debt.