Acceleration Clause


DEFINITION of 'Acceleration Clause'

A contract provision that allows a lender to require a borrower to repay all or part of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment.

Also known as "acceleration covenant".

BREAKING DOWN 'Acceleration Clause'

For example, a borrower who fails to make a payment or who breaks a covenant may be required to pay the lender the balance on a loan. In this case, the borrower is considered in breach of contract.

Acceleration clauses are most commonly found in mortgage and real estate loans. Since these loans tend to be so large, the clause helps protect the lender from the risk of borrower default.

  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Affirmative Covenant

    A type of promise or contract which requires a party to do something. ...
  3. Restrictive Covenant

    Any type of agreement that requires the buyer to either take ...
  4. Acceleration Covenant

    A clause included in certain debt securities and swap agreements ...
  5. Covenant

    A promise in an indenture, or any other formal debt agreement, ...
  6. Encumbrance

    A claim against a property by a party that is not the owner. ...
Related Articles
  1. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  2. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  3. Home & Auto

    The Benefits Of Mortgage Repayment

    Buying a home may be the biggest debt you'll ever incur. Learn why you should retire it sooner, rather than later.
  4. Options & Futures

    Conquering The Terms Of Your Mortgage

    Buyers with big down payments should get the best mortgage terms. Unfortunately, the equation isn't that simple.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Options & Futures

    Saving Your Home From Foreclosure

    Learn the tactics you can use to prevent your home from being repossessed.
  7. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  8. Options & Futures

    Subprime Is Often Subpar

    Proceed with caution when considering these short-term, high-interest mortgages.
  9. Insurance

    What is a Force Majeure?

    A force majeure clause frees both parties in a contract from fulfilling their obligations in the event of some catastrophic or unexpected occurrence.
  10. Credit & Loans

    Explaining Equated Monthly Installments

    An equated monthly installment is a fixed payment a borrower makes to a lender on the same date of each month.
  1. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  2. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  3. What are the long-term effects of delinquent accounts?

    Delinquency occurs when borrowers fail to make payments on their loans. All loan borrowers should do their best to avoid ... Read Full Answer >>
  4. How was the American Dream impacted by the housing market collapse in 2008?

    The American Dream was seriously damaged by the housing market collapse in 2008. In many ways, the American Dream is a self-fulfilling ... Read Full Answer >>
  5. How much risk is associated with subprime mortgages?

    A large amount of risk is associated with subprime mortgages. Since the mortgages are specifically for people who do not ... Read Full Answer >>
  6. What are the financial consequences of filing for bankruptcy?

    The financial consequences of filing for bankruptcy are substantial and can be long-lasting. They include impacts on your ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!