We use cookies to improve security, personalize the user experience,
enhance our marketing activities (including cooperating with our marketing partners) and for other
business use.
Click "here" to read our Cookie Policy.
By clicking "Accept" you agree to the use of cookies. Read less
What is an Acceleration Clause and Why It Matters in Contracts?
Definition & Meaning
An acceleration clause is a provision in a contract that allows a lender to demand the full repayment of a loan if the borrower defaults on their obligations. This clause is commonly found in installment notes, mortgages, or deeds of trust. If a specified event occurs"such as failing to make a payment on time, transferring ownership without the lender's consent, or causing damage to the property"the lender can invoke this clause to collect the remaining balance immediately.
Table of content
Legal Use & context
Acceleration clauses are primarily used in the context of loans and real estate transactions. They are prevalent in:
Mortgages
Installment loans
Deeds of trust
These clauses help protect lenders by allowing them to secure their interests if the borrower fails to meet their obligations. Users can manage these documents through legal templates provided by services like US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A homeowner misses two consecutive mortgage payments. The lender invokes the acceleration clause, requiring the homeowner to pay the entire outstanding balance immediately.
Example 2: A borrower sells their property without informing the lender, violating the loan agreement. The lender can declare the loan due in full due to the acceleration clause. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Acceleration Clause Regulations
California
Requires lenders to provide a notice of default before invoking the clause.
Texas
Allows lenders to accelerate the loan without prior notice in certain circumstances.
Florida
Requires clear language in the contract regarding the acceleration rights.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Default Clause
A provision that outlines what constitutes a default.
Acceleration clauses are a type of default clause that triggers full repayment.
Prepayment Penalty
A fee for paying off a loan early.
Prepayment penalties do not involve immediate repayment of the entire balance.
Common misunderstandings
What to do if this term applies to you
If you are facing a situation where an acceleration clause may be invoked, consider the following steps:
Review your loan agreement to understand the specific terms and conditions.
Communicate with your lender to discuss your options and potential solutions.
Explore US Legal Forms for templates that can help you manage your loan documents effectively.
If your situation is complex, consult a legal professional for personalized advice.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.