An acceleration clause is a provision in a loan agreement or contract that allows the lender to demand immediate repayment of the entire loan or take other actions if the borrower fails to meet certain conditions or defaults on the agreement. This clause gives the lender the right to accelerate the maturity date of the loan, making the entire outstanding balance due and payable.

Key features of an acceleration clause include:

1. **Conditions Triggering Acceleration:**
– Acceleration clauses typically specify the conditions or events that can trigger the lender’s right to accelerate the loan. Common triggers include non-payment of installments, violation of covenants, bankruptcy of the borrower, or a significant deterioration in the borrower’s financial condition.

2. **Demand for Immediate Repayment:**
– When the acceleration clause is triggered, the lender has the right to demand immediate repayment of the entire outstanding balance, including principal and any accrued interest.

3. **Protecting Lender’s Interests:**
– Acceleration clauses are designed to protect the interests of the lender by allowing them to respond swiftly to borrower defaults. By accelerating the loan, the lender can take action to recover the outstanding amount and limit potential losses.

4. **Enforcement Options:**
– In addition to demanding repayment, acceleration clauses may outline other enforcement options available to the lender, such as pursuing legal remedies, seizing collateral, or taking possession of secured assets.

5. **Negotiation and Customization:**
– The terms of acceleration clauses can vary and are often subject to negotiation between the lender and borrower during the loan agreement’s drafting. The specific triggers, notice requirements, and remedies available to the lender can be customized based on the parties’ preferences.

6. **Impact on Borrower:**
– For the borrower, the activation of an acceleration clause can have significant financial consequences. It may require the immediate repayment of a substantial amount, potentially leading to financial strain and, in severe cases, default.

Acceleration clauses are commonly found in various types of loan agreements, including mortgages, business loans, and other credit arrangements. Borrowers should carefully review and understand the terms of any acceleration clause in a loan agreement, as failure to comply with the specified conditions can have serious consequences. Legal advice may be sought to ensure a thorough understanding of the implications and potential remedies in the event of acceleration.