What is acceleration clause?
An acceleration clause is a lease preparation that permits a bank to require a borrower to return all of an outstanding loan if specific qualifications are not met. An acceleration clause describes the reasons for which the lenders can demand loan repayment before the due date. Acceleration clauses are mostly well-known in mortgage loans and help to decrease the risk of oversight for the lender. These clauses are usually based on payment crimes, but they can be used for other occasions as well. In most instances, an acceleration clause will ask the borrower to instantly pay the entire balance owed on the loan if certain conditions in the loan agreement are not satisfied. With a total return of the loan, the borrower is discharged of any further interest payments and typically pays off the loan ahead at the time the acceleration clause is invoked. Depending on payment delinquency, the number of delinquent payments in an acceleration clause can vary. Some of them can invoke instant payoff after one fee is missed while others may allow for two or three missed payments before requiring that the loan is paid in full. Trading or transferring the property to another party can also possibly be a factor associated with an acceleration clause.