Acceleration Clause (loan)

Financial Dictionary -> Loans -> Acceleration Clause (loan)

Acceleration clause is a clause in your loan contract allowing the lender to require payment in full of the remaining loan balance or to accelerate the rate of the loan repayment.

The term acceleration clause is part of a home loan agreement that can help to protect the lender if the payments on a purchased home are not paid according to the agreement. This is a covenant in a property loan that must be thoroughly read by the borrower in order to protect themselves and to ensure there are no unusual demands later in the term of loan.

This clause is able to assist in protecting the lender in several different scenarios, the first of which is if the loan holder defaults, the second prohibits the buyer from selling the property without the express permission of the loan holder. The third situation is protecting the loan holder if the buyer wants to end the relationship, by guaranteeing that the loan holder will be able to collect outstanding fees.

The acceleration clause can be used to explain common terms of compliance of a loan and specifically outline what will occur if the terms are not met. The clause can also specify the date when payments are to be expected and the penalty that can ensue if payment is not made on the specified date.

Should the borrower transfer the title to another party without the express consent of the lender, the lender can digress to the clause to be protected and demand payment for the property.