 Sam
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 Posted: Thu Apr 08, 2004 4:00 am Post subject: Acceleration clause gives right to the lender |
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Acceleration Clause is a clause used in an installment note and mortgage which gives the right to the lender that they can demand the entire debt upon the happening of certain events (like failure to pay an installment in time, change of ownership without having the lender's consent and others) which endangers the security of the loan.
For example, John owned a house and had a mortgage on that house whose monthly payment is $10,000. He took the mortgage from Carole for 5 years. He was paying his monthly payment regularly till 2 years. In the 3rd year, due to loss in business he was not able to pay his monthly payment. Due to default in monthly payments, Carole demanded the entire debt. This clause of demanding the entire debt is known as 'acceleration clause'.
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