Definition
An acceleration clause is a contractual provision that allows a lender to demand immediate repayment of a loan if the borrower defaults on the loan. This clause is typically included in loan agreements and mortgages.
Importance
The acceleration clause is an important provision in loan agreements and mortgages because it allows the lender to take action if the borrower fails to make payments on time. This clause gives the lender the right to demand immediate repayment of the loan, which can help protect the lender from financial losses.
Example
For example, if a borrower fails to make a payment on their mortgage, the lender can invoke the acceleration clause and demand immediate repayment of the loan. If the borrower is unable to repay the loan, the lender can take legal action to recover the money.
Table
Acceleration Clause
Definition A contractual provision that allows a lender to demand immediate repayment of a loan if the borrower defaults on the loan.
Importance Protects the lender from financial losses.
Example If a borrower fails to make a payment on their mortgage, the lender can invoke the acceleration clause and demand immediate repayment of the loan.
Key Takeaways
- An acceleration clause is a contractual provision that allows a lender to demand immediate repayment of a loan if the borrower defaults on the loan.
- This clause is typically included in loan agreements and mortgages.
- The acceleration clause is an important provision in loan agreements and mortgages because it allows the lender to take action if the borrower fails to make payments on time.
- This clause gives the lender the right to demand immediate repayment of the loan, which can help protect the lender from financial losses.
- If the borrower is unable to repay the loan, the lender can take legal action to recover the money.
Conclusion
The acceleration clause is an important provision in loan agreements and mortgages that allows the lender to take action if the borrower fails to make payments on time. This clause gives the lender the right to demand immediate repayment of the loan, which can help protect the lender from financial losses. It is important for borrowers to understand the terms of their loan agreement and be aware of the acceleration clause in order to avoid any potential legal action.
