Event of default is a term used in commercial loan documentation. It refers to the occurrence of an event which allows the lender to demand repayment of the loan in advance of its normal due date (also known as accelerating the loan). In a revolving credit

Revolving credit

Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Examples of revolving credits used by consumers include credit cards. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day...

 facility, the occurrence of an event of default normally also allows the lender to cancel any obligations to make further loan advances.

There are two types of event of default:

• actual default, ie the failure to pay principal or interest when it falls due for payment; and
• prospective default, when payment is not yet due, but it is clear that it will not be capable of being paid when it does fall due. For example, a payment is due in three months' time but the borrower has been put into liquidation
  Liquidation
  In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
  
  .