Default Rate

"Default lies not in our stars…" Eh, sorry, Will.

The default rate actually lies in the percentage of loans (mortgage, credit card, or otherwise) that have been charged off (written off) by a lender due to missed payments.

If you're considering investing in unsecured debt, keep the default rate in mind. So if Serge invests in a portfolio of 100 mortgages, odds are he'll see a total loss on roughly four of them if the average default rate on residential real estate loans is around 3.8%.