DEFAULT RATE Meaning and
Definition
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Default rate is a financial term that refers to the percentage of borrowers or debtors who fail to repay their loans or fulfill their financial obligations as agreed upon in the terms of the loan or credit agreement. It is a commonly used metric to assess the creditworthiness or financial stability of borrowers, financial institutions, or even entire economies.
In simple terms, default rate indicates the percentage of individuals or institutions that are unable to make scheduled payments, resulting in a default. This can include failing to make timely payments, missing payments entirely, or declaring bankruptcy. The default rate is typically expressed as a percentage and is calculated by dividing the number of defaults by the total number of borrowers or loans in a given period.
Default rates are widely monitored and reported in various sectors including consumer credit, mortgages, corporate loans, and government bonds. A high default rate is a cause for concern as it suggests a higher level of credit risk or instability within the financial system. Conversely, a low default rate indicates a lower level of credit risk and is considered a positive indicator of financial health.
Default rates are used by lenders, investors, and rating agencies to assess the risk associated with loans, bonds, or investment portfolios. It helps in determining interest rates, assessing creditworthiness, and making informed decisions about lending or investment opportunities.
Common Misspellings for DEFAULT RATE
- sefault rate
- xefault rate
- cefault rate
- fefault rate
- refault rate
- eefault rate
- dwfault rate
- dsfault rate
- ddfault rate
- drfault rate
- d4fault rate
- d3fault rate
- dedault rate
- decault rate
- devault rate
- degault rate
- detault rate
- derault rate
- defzult rate
- defsult rate
Etymology of DEFAULT RATE
The etymology of the word "default rate" can be broken down as follows:
1. Default: The word "default" originates from the Old French word "defaute" which means "failure, lack, or deficiency". It is derived from the Latin word "fallere" meaning "to deceive, let down, or disappoint".
2. Rate: The word "rate" comes from the Old French word "rata" or "rate" meaning "proportion or value". It is derived from the Medieval Latin word "rata" or "ratio" which means "reckoning, calculation, or reason".
When combined, "default rate" refers to the proportion or calculation of failures or lack in meeting financial obligations or debt repayments.
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