Question

What are some reasons why a borrower defaults on their loan obligations?

Answer 1

Some reason borrower defaults on their loan obligations

What Is Default?
The default is the failure to repay a debt together with interest or principal on a loan or security. A default will occur once a borrower is unable to form timely payments, misses payments, or avoids or stops creating payments.

Loan defaulters fall in 2 categories: Wilful defaulter and unwilful defaulters

Wilful defaulters: generally these are people who don't meet their loan obligations despite having the resources to try and do this. By borrowing while not intending to repay they're perpetuating a fraud on the banking industry.

Unwilful defaulters: These are people who for a few reasons who don't seem to be able to generate the expected income from their business and don't have the other resources to repay their loan. These will happen for any reason

• Environmental – natural disasters, adverse weather, and drought will disrupt a little business within the short and future, significantly if it involves growing or selling food.
• Social – religious festivals, political elections, and social unrest will disrupt traditional business operations and cause incomes to fluctuate. Major events in a very person’s life, just like the birth of a baby or the death of a family member may also have an effect on their ability to operate their business.

1. Disruption in an offer of raw materials for any reason. It might be small because of a drawback with suppliers or at a macro level like a global shortage
2. If the borrower is in a commodity business it might happen as a result of the worldwide value of their finished product has crashed (for example steel)
3. the corporate might lose funds if it speculates in derivatives, equities or in alternative markets.
4. the corporate might lose cash because of fines obligatory by regulators or adverse court orders.