We calculate a perfect payment value at the start of your loan and then plot against time how much you should have paid in total by a certain date. This is referred to as the perfect payment schedule. If the total amount paid by you at a specific point in time is less than the total expected from the perfect schedule, your account is in arrears. The arrears value is calculated as the difference between the perfect schedule and the total you have paid.

The further your loan fall into arrears, the more directly it must be managed to try and prevent the loan from falling into default, which happens when the loan reaches a point where it is 7 perfect payments or more behind schedule.

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