A payment default occurs when a debtor fails to pay an amount — whether a full invoice, an instalment under a payment arrangement, or another scheduled payment — by the date on which it falls due under the contract, invoice or arrangement.
What triggers a payment default:
- An invoice that has not been paid by its due date.
- A missed instalment under a payment arrangement.
- A direct debit that has dishonoured or been rejected.
- Failure to pay following a formal demand within the timeframe specified.
What a payment default means:
- Late payment interest may begin to accrue from the date of default, if provided for in the original contract.
- The creditor's right to issue a formal default notice — and potentially list the default on a credit file — may be triggered.
- Under an event-of-default clause in a loan or commercial contract, the creditor may become entitled to demand immediate repayment of the full outstanding balance.
- Recovery escalation may commence: a letter of demand, referral to a collection agency, or legal proceedings.
If you have missed a payment or are about to, contacting us before the default occurs — or as soon as possible after — gives the most room to find a workable solution. See the articles on payment arrangements and financial hardship for more.
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