Acceleration Clause: A provision in a contract or loan agreement that allows the lender or creditor to demand immediate payment of the entire outstanding balance if the borrower or debtor fails to meet certain conditions or obligations, such as missing payments or defaulting on the loan. This clause is often included in contracts for real estate, business loans, and credit agreements. The purpose of an acceleration clause is to protect the lender or creditor from potential losses and to ensure that they receive the full amount owed to them in a timely manner.
An acceleration clause is a provision commonly found in loan agreements or contracts that allows the lender or creditor to demand immediate payment of the entire outstanding balance if the borrower or debtor fails to meet certain obligations or conditions specified in the agreement. This clause essentially accelerates the repayment schedule, bypassing the agreed-upon installment payments and requiring the borrower to repay the entire loan amount in one lump sum. The trigger events for invoking the acceleration clause may include defaulting on payments, breaching the terms of the agreement, or experiencing a significant decline in the borrower’s financial condition. The purpose of an acceleration clause is to protect the lender’s interests by ensuring prompt repayment in case of non-compliance by the borrower. However, the enforceability of acceleration clauses may vary depending on jurisdiction and the specific terms of the agreement.
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This glossary post was last updated: 29th March 2024.
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