nonaccrual

nonaccrual

The actions of a lender making a change in how a loan is accounted on its books. Normally, the lender will treat itself as receiving income as interest comes due—accrues—on the loan.Under normal circumstances,the lender can expect to actually receive the cash in a very short period of time afterward.When a borrower defaults and does not pay its interest, and the default continues for several months,the lender will reach the point where it begins to doubt if it will ever receive the cash for the interest that is accruing.At that point,it does not make business sense and, in fact,might be against federal regulations,to keep acting as if the lender were receiving income.As a result,the lender places the loan on nonaccrual,and stops posting income from the loan.This is a bookkeeping and accounting action only. It does not mean the lender will not attempt to collect every nickel of money due to it.