Acceleration Clause

What is an '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.

RELATED TERMS
  1. Acceleration Covenant

    A clause included in certain debt securities and swap agreements ...
  2. Event Of Default

    An action or circumstance that causes a lender to demand full ...
  3. After-Acquired Clause

    A provision included in legal contracts ensuring that subsequent ...
  4. Lender

    Someone who makes funds available to another with the expectation ...
  5. Negative Pledge Clause

    A negative covenant in an indenture stating that the corporation ...
  6. Contingency Clause

    A contract provision that requires a specific event or action ...
Related Articles
  1. Markets

    Corporate Bonds and the Importance of Covenants

    Any type of investor, private or institutional, should be acquainted with the significance of covenants in corporate bond agreements.
  2. Investing

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  3. Investing

    Understanding Covenants

    A covenant is a term placed in a loan that requires the borrower to either maintain or refrain from certain business activities.
  4. Investing

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  5. Markets

    Tips To Improve Chances Of A Small Business Loan

    Enhance your small business loan eligibility by keeping these important tips in mind.
  6. Personal Finance

    Student Loan Debt: Is Consolidation The Answer?

    Consolidating student loans entails taking out a new loan to pay off existing loans. It sounds simple, but there are a few things to keep in mind.
  7. Personal Finance

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
  8. Managing Wealth

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  9. Investing

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
  10. Personal Finance

    Student Loans: Loan Repayment

    After graduation you'll begin the task of paying off your student loans. This is called entering repayment. The term repayment is used because your lenders made payments to you while you ...
RELATED FAQS
  1. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  2. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  3. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  4. What is the most important "C" in the Five Cs of Credit?

    Learn how the five C's of credit affect new credit application decisions, and understand how a lender analyzes each aspect ... Read Answer >>
  5. What factors should I consider when shopping for the best mortgage lender?

    Comparing lenders to obtain the best mortgage loan requires research and willingness to shop around for the best loan to ... Read Answer >>
  6. Why do companies issue debt and bonds? Can't they just borrow from the bank?

    Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank ... Read Answer >>
Trading Center