Early payment default (EPD)
Early payment default (EPD) is a loan that becomes 30 or more days past due on one of its first three installments, under a common definition. First payment default (FPD) counts only the first installment, while EPD can also include trouble on the second or third.
Example
As an illustration, suppose a loan’s second installment becomes 30 days past due. Under the common definition, that loan counts as an EPD because the second installment is among the first three. It would not be an FPD, which is limited to the first installment.
How the early payment default rate is measured
Include only loans old enough to have reached the installment being assessed. A recently booked loan is not yet eligible for a measure based on an installment it has not reached.
Divide the qualifying loans by the eligible loans, then multiply by 100 to get the rate. The denominator is the eligible group, not every loan booked in the period.
What early payment defaults can reveal
A loan with no payments at all may raise a fraud concern. An EPD pattern can also point to a problem tied to a broker or store channel, rather than credit risk alone. The pattern is a reason to investigate, not proof of a cause.
Compare EPD by channel to locate where the problem may be coming in. A review can test whether stated income was wrong or checks at a broker or store failed, but an EPD pattern alone establishes neither. It is not a reason to assume an individual applicant committed fraud.
Questions we get asked
Is EPD counted per loan or per missed installment?
It is counted per loan. A loan qualifies when one of the relevant early installments meets the definition, so the rate is a share of eligible loans, not a count of every late installment.
Does an early payment default mean the loan will never be repaid?
No. EPD describes an early missed-payment outcome, not what happens to the loan later. The term alone does not say whether the borrower resumes payments.
Why track first payment default separately from EPD?
FPD isolates trouble on the first installment. EPD can also capture trouble on the second or third, so the labels distinguish when the early repayment problem appears.
The free early payment default calculator calculates the rate by channel and shows which channels run hot and what closing them would stop.
