Default Premium
The additional amount a borrower must pay to compensate the lender for assuming default risk.
Investopedia Commentary
The default premium is paid by companies with lower grade bonds or by individuals with poor credit. As an illustration, companies with poor financials will tend to compensate investors for the additional risk by issuing bonds with high yields. And individuals with poor credit must pay higher interest rates in order to borrow money from the bank.
Related Links
Junk Bonds: Everything You Need to Know
What Is A Corporate Credit Rating?
See also: Default, Default Risk, Premium