We want you to know exactly how this works before you ever need it. Here is the full timeline, with no sugarcoating.
Before the due date
We email you reminders 14 days, 5 days, and 1 day before your loan matures, in your property’s local timezone. Important: emails can occasionally be marked as spam. Always set your own reminders. Default will occur regardless of any notification issues, and repayment responsibility lies solely with you.
If repaying in full is hard, check your property page for a Refinance option, and watch the reminder emails for an extension offer. Acting before the due date gives you the most options.
At the due date
There is no grace period. If the loan is not fully repaid by the due date, it defaults. Two things are then true at once:
You are still the beneficial owner of your property.
The defaulted loan can now move toward liquidation.
Your property page will show a Defaulted Loan card marked overdue.
The notice period
Before any sale, a formal notice is issued under the UCC (the Uniform Commercial Code, the commercial law that governs secured loans). You then have at least 10 days’ notice before the auction can begin. The notice explains your redemption rights and deadlines.
The auction
After the notice period, the property token is sold at a public auction. How long it runs depends on the lending pool: legacy pools ran 24-hour auctions, and newer pools run 2-week auctions. Bids are placed in USDC, a stablecoin (a digital dollar that always equals $1), with a minimum increase of 2% per bid.
Your rights, plainly
Before the auction starts, full repayment prevents it. Repay the full outstanding amount, including accrued interest and costs, and the process stops and your property returns to your account. Partial payments do not stop the process. Only full repayment does.
Once the auction starts, bidding in it is the only way to keep the property. You remain the owner until the auction closes, but when it closes, the winning bidder becomes the new owner. If you want to keep your property at that point, you have to be the winning bidder.
Surplus comes back to you. If the auction brings in more than your debt plus costs, the excess is returned to you. If it brings in less, you receive nothing, but the property is sold at public auction rather than simply taken by the lender.
Afterward
The loan’s only recourse is the property token itself. Once the liquidation completes, you owe nothing further, even if the auction brought in less than your debt. Fabrica does not report to credit bureaus, so a default here does not appear on your credit report.
A default might affect your future borrowing on Fabrica, though: your repayment history here can be taken into account when future loan offers are calculated. If your situation is heading this way, talk to us early: open the chat bubble in the corner.
Learn more:Loan defaults in detail