Acceleration clause means any loan agreement which needs borrowers to repay their loans instantly, on the basis of specific terms and conditions. This is usually brought into force when a loan agreement is violated/breached by a borrower.
Acceleration clauses are those which are contractual provisions, enabling lenders to have borrowers repay the entire outstanding loan amount, in case specific conditions/requirements are not adhered to. Acceleration clauses list the reasons under which lenders may demand the repayment of loans, and the amount that is required. It is sometimes called an acceleration covenant.
Acceleration clauses have an intrinsic relationship with the real estate sector. They are commonest for mortgage or home loans. They help in lowering default risks for banks and financial institutions. They are mostly based on the delinquencies related to payments, although they can be tailored for covering other instances as well. Borrowers, under these clauses, will have to instantly repay the entire due balance of the loan, in case the terms and conditions have been violated.
