In the event of default, what does the borrower agree to pay?

When a borrower defaults on a loan, the terms outlined in the loan agreement typically stipulate that the borrower is responsible for various costs incurred by the lender as a result of the default. Among these, legal expenses are significant because they cover the costs associated with the lender's efforts to recover the owed amount or to enforce the terms of the loan agreement.

This includes attorney fees and court costs that arise during foreclosure or legal proceedings initiated to collect on the defaulted loan. It is a standard provision in many loan contracts because it holds the borrower accountable for the financial repercussions of their default, ensuring that lenders can seek compensation for the additional burdens imposed by such circumstances.

While the loan principal and interest payments certainly are relevant to the borrower's obligations under the loan agreement, they typically have already been stipulated in the repayment terms and stress the borrower's ability to repay. Insurance costs or other costs typically fall under the lender’s responsibility unless explicitly agreed otherwise in the contract. Therefore, the borrower's agreement to cover the lender's legal expenses is a crucial aspect of the responsibilities assumed in the event of default.