Business, Legal & Accounting Glossary
An acceleration clause is put into a loan agreement to require the borrower to pay the unpaid balance for specific reasons if a default occurs.
n. a provision in a contract or promissory note that if some specified event (like not making payments on time) occurs then the entire amount is due or other requirements are due now, pronto. This clause is most often found in promissory notes with instalment payments for the purchase of real property and requires that if the property is sold then the entire amount of the note is due immediately (the so-called “due on sale clause”). Some states prohibit “due on sale” and always allow the new property owner to assume the debt.
The provision in a credit agreement, such as a mortgage, note, bond, or deed of trust, allows the lender to require immediate payment of all money due if certain conditions occur before the time that payment would otherwise be due.
The agreement may call for acceleration whenever there is a default of any important obligation, such as nonpayment of principal or interest, or the failure to pay insurance premiums.
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This glossary post was last updated: 4th August, 2021 | 2 Views.