Acceleration Clause

AAA

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".

INVESTOPEDIA EXPLAINS '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. Mortgage

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

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

    A promise in an indenture, or any other formal debt agreement, ...
  4. Restrictive Covenant

    Any type of agreement that requires the buyer to either take ...
  5. Affirmative Covenant

    A type of promise or contract which requires a party to do something. ...
  6. Forbearance

    A temporary postponement of mortgage payments.
Related Articles
  1. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  2. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  3. The Benefits Of Mortgage Repayment
    Home & Auto

    The Benefits Of Mortgage Repayment

  4. Conquering The Terms Of Your Mortgage
    Options & Futures

    Conquering The Terms Of Your Mortgage

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center