A loan that is not performing according to its terms, either from the borrower failing to fulfill payment obligations, or the note has matured without being paid off.
A lender issues a $500,000 loan to a real estate developer for a property renovation project. The developer makes timely payments for the first six months but then experiences financial difficulties, causing them to miss payments for three consecutive months. At this point, the lender classifies the loan as a non-performing loan due to the missed payments.