Acceleration Clause
What Does Acceleration Clause Mean?
An acceleration clause is a provision in a loan contract that gives the lender the right to require the borrower to repay part or all of the remaining loan balance under certain conditions. As the name suggests, it accelerates repayment. The clause outlines the specific reasons the lender can demand immediate repayment of the loan.
Insuranceopedia Explains Acceleration Clause
Mortgage and real estate loans often include acceleration clauses because lenders providing large sums of money want to protect themselves from the risk of borrower default. The lender may require immediate repayment if certain conditions are met, such as a breach of contract, failure to make a payment, or failure to pay property taxes.
In the context of insurance, an acceleration clause may specify that failure to pay homeowner’s insurance premiums is a valid reason for the lender to demand immediate repayment of the loan.
