First Payment Default (FPD)

First Payment Default (FPD) refers to a scenario in which a borrower fails to make their first scheduled payment on a loan or credit obligation. It is often used as a measure of credit risk, indicating the likelihood of a borrower defaulting on their debt in the future. FPD is commonly associated with the lending industry, such as mortgages, auto loans, or credit cards.

Lenders frequently consider FPD as a red flag because it indicates that the borrower may not have the financial capacity or commitment to fulfill their loan obligations. The non-payment of the first installment can be a result of various factors, including financial distress, lack of income, poor credit history, or intentional fraud. Having a high FPD rate can significantly impact a lender’s profitability, as it increases the probability of future defaults and leads to financial losses for the lender.

In summary, First Payment Default is a term used to describe the failure of a borrower to make their initial payment on a loan or credit obligation. Lenders view FPD as a warning sign of potential credit risk and may use it as a metric to assess the borrower’s repayment ability and the likelihood of future delinquencies.

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