Portfolio metric measuring the share of loans that have entered default under the lender's or reporting framework's definition.
The default rate measures the share of loans in a portfolio that have entered default. It is a credit-performance metric used to track serious repayment failure after delinquency has progressed far enough to breach the lender’s or reporting framework’s definition of default.
Default rate sits between early stress indicators like delinquency and later realized-loss indicators like charge-offs. It helps lenders and investors understand how much of the portfolio has crossed from payment trouble into more severe contractual failure.
The exact definition of default can differ by lender, regulation, asset class, or reporting standard, but the general logic is:
Some frameworks define default through missed-payment aging thresholds, while others add restructuring, impairment, or other triggers.
| Metric | What it captures |
| — | — |
| Delinquency Rate | Loans that are overdue |
| Default Rate | Loans that have crossed into a more severe failure state |
| Charge-Off Rate | Loans or balances already recognized as loss |
If a lender tracks default once accounts pass a defined nonpayment or contractual-breach threshold, and 25 loans in a 1,000-loan portfolio meet that threshold, the default rate is 2.5%.
Delinquency Rate tracks overdue accounts, many of which may still cure. Default rate is more severe and usually reflects accounts that have crossed a later-stage threshold.
A loan may be in default before it is charged off. Charge-off relates to accounting loss recognition, while default relates to contractual or regulatory failure status.
Delinquency Rate: Earlier-stage portfolio stress metric.
Charge-Off Rate: Later-stage loss-recognition metric.
Default: Underlying event or status the default-rate metric is measuring.
Charge-Off: Loss-recognition event that may follow default.