What does it mean if a borrower defaults on a loan?

When a borrower defaults on a loan, it specifically means that they have failed to make the required payments as stipulated in the loan agreement. Defaulting can occur after missing a single payment or multiple payments, depending on the terms of the loan. This situation places the borrower in violation of the loan contract, which can lead to serious consequences such as foreclosure, loss of collateral, or damage to the borrower's credit score.

In context, overpayments indicate that the borrower is paying more than necessary, which is the opposite of defaulting. Fully paying off a loan means the borrower has successfully concluded their payment obligations, and refinancing represents a modification of the loan terms, rather than failing to meet them. Thus, the definition of default is aligned with failing to meet payment obligations, clearly making it the accurate choice in this scenario.