Debt service by default is that default in the scheduled payment of a given loan; therefore, it occurs when a certain debtor does not cancel a scheduled payment regarding interest or principal payment. In other words, this default debt service generally refers to the non-payment of the loan, so it could be classified as a partial or complete default of debt service; however, it should be noted that the inability of a borrower to pay, for whatever causes that arise, a loan will not prevent it from entering a state of default.
Defaults on scheduled loans are reported to the credit bureaus, usually after 60 days late. After the loan is in default, the interest plus principal must be paid in full. A lender has several options for obtaining the money including garnishing wages, seizing funds from a bank account, or withholding the money from the annual tax refund.
As is well known, a default is the non-payment of a debt and that can be classified into sovereign default, technical default, strategic default, and the one previously exposed, the debt service by default, of which the ones that most manage to differentiate themselves are These last two are due to the fact that the strategic default occurs more as a financial strategy and not involuntarily, while the debt service by default does not. But each of its classifications refers to the default on a loan, which means that a borrower has not met the conditions for the repayment of a debt and for each default the consequences will vary for said default.
