Hello Leon
Cisco states it this way:
The set ip default next-hop command verifies the existence of the destination IP address in the routing table, and…
- if the destination IP address exists, the command does not policy route the packet, but forwards the packet based on the routing table.
- if the destination IP address does not exist, the command policy routes the packet by sending it to the specified next hop.
The set ip next-hop command verifies the existence of the next hop specified, and…
- if the next hop exists in the routing table, then the command policy routes the packet to the next hop.
- if the next hop does not exist in the routing table, the command uses the normal routing table to forward the packet.
This comes from the following documentation on the subject which explains it in further detail and with examples:
I hope this has been helpful!
Laz