Acceleration Clause
What Is an Acceleration Clause?
An acceleration clause is a provision in a loan contract that allows the lender to demand immediate repayment of the entire outstanding balance if the borrower defaults.
Acceleration clauses are standard in most mortgage agreements and many other loan types.
Why It Matters in a Mortgage
An acceleration clause:
- Escalates consequences of default
- Precedes foreclosure
- Strengthens lender enforcement rights
If triggered, the borrower must repay the full loan balance rather than just overdue payments.
Acceleration significantly changes the borrower’s options.
How It Works
- Borrower misses payments or violates loan terms.
- Lender issues notice of default.
- Acceleration notice demands full repayment.
- If unpaid, foreclosure proceedings may begin.
State law governs timelines and borrower rights.
Acceleration Clause vs. Due-on-Sale Clause
Acceleration Clause → Triggered by default
Due-on-Sale Clause → Triggered by transfer of ownership
Each clause protects lender interests in different scenarios.
FAQs About Acceleration Clauses
Can acceleration be stopped?
In some cases, curing the default before foreclosure may halt enforcement.
Does acceleration immediately mean foreclosure?
Not automatically, but it signals serious default status.
Are acceleration clauses common outside mortgages?
Yes, many loan contracts include similar provisions.
Related Terms
