Temporary Default

You took a loan to get your tofu sandwich stand going. Tofun. The loan agreement stipulated that if you go 90 days late on your loan payments, you default on the deal.

You've hit some tough times. You haven't paid your loan for a few months. Finally, you beg your rich sister-in-law to help you out. She agrees, allowing you to send all the back payments to your lender. And rename the place Nofun. They get the check on the 91st day.

You technically defaulted when you went over the 90-day market, but you quickly got back in line. Temporary default. Like those people who are clinically dead for three minutes on the operating table, but get revived using those zappy paddles. They are temporarily dead, but come back.

The term also comes up in bond trading. If the issuer of a bond misses a couple interest payments, but quickly gets back on course, they are said to suffer a temporary default. It doesn't necessarily mean a full disaster. Still, the bond's credit rating will likely get downgraded.

The extent of the damage depends on the situation. There was a lot of controversy in 2011 when it looked like the U.S. might go into temporary default on its debt payments as a result of some maneuvering between the political parties. However, rating agency Fitch announced that even a temporary default would have a long-term detrimental impact on the U.S. credit rating.