Glossary definition
Default Interest
An increased rate of interest charged by the lender when a borrower breaches the terms of their facility agreement, typically triggered by a missed repayment, expiry of the loan term, or breach of a financial covenant. Default interest rates are usually 3–5% per annum above the standard coupon and are intended to compensate the lender for the increased risk and administrative burden of managing a defaulted loan.
Definition
An increased rate of interest charged by the lender when a borrower breaches the terms of their facility agreement, typically triggered by a missed repayment, expiry of the loan term, or breach of a financial covenant. Default interest rates are usually 3–5% per annum above the standard coupon and are intended to compensate the lender for the increased risk and administrative burden of managing a defaulted loan. Borrowers should be aware that default interest can accumulate rapidly and is enforceable provided it represents a genuine pre-estimate of loss.
See also
Closely related terms.
Facility Agreement
The legal contract between a borrower and a lender that sets out all terms and conditions of the loan including the facility amount, interest rate, drawdown mechanics, repayment terms, covenants, and events of default.
Coupon
The stated interest rate on a loan, expressed as an annual percentage and representing the periodic cost of borrowing before fees and other charges.
Rolled Up Interest
An interest arrangement where monthly interest charges are added to the outstanding loan balance rather than being paid by the borrower each month.
Non-Recourse Loan
A loan where the lender's sole remedy in the event of default is to enforce against the secured property, with no additional claim against the borrower's other assets or personal wealth.
Further reading
Guides that touch this term.
Guide
What Happens When a Development Loan Defaults? A Step-by-Step Guide
A detailed walkthrough of the development loan default process in the UK, from initial breach notice through to enforcement, and what developers can do at each stage to protect their interests.
12 min read readReadGuide
Hidden Arrangement Fees in Development Finance: What Lenders Don't Tell You
Arrangement fees in development finance are rarely as straightforward as a single percentage. This guide exposes the hidden layers of fees that lenders charge and shows you how to negotiate effectively.
9 min read readReadGuide
Legal Due Diligence in Development Finance: What Solicitors Check
Legal due diligence is the backbone of every development finance transaction. This guide explains what solicitors investigate, common issues that delay completions, and how to prepare your legal pack.
9 min read readRead
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