strategic defaults

A strategic default occurs when a borrower chooses to stop paying a loan or mortgage intentionally, even though they can afford to continue payments. This decision is made because the borrower believes that continuing payments isn't financially beneficial—perhaps because the property's value has fallen below the loan amount, or they want to conserve cash for other priorities. While it can harm credit scores, strategic defaults are sometimes viewed as a rational choice in specific financial situations, especially during economic downturns. They differ from defaulting due to inability to pay, as the decision is based on strategic financial reasoning rather than hardship.