What Does Acceleration Clause Mean?
An acceleration clause is a loan contract provision that gives the lender the right to require the borrower to pay back part or all of the remaining payments on a loan under specified conditions. As the name suggests, it accelerates repayment. The clause details the reasons the lender can demand loan repayment.
Insuranceopedia Explains Acceleration Clause
Mortgage and real estate loans often include acceleration clauses. This is because lenders who provide large amounts of money do not want the borrowers to default on the loan. The possible reasons the lender may require payment include a breach of contract, failure to make a payment, and not paying property taxes.
In terms of insurance, an acceleration clause may stipulate not paying homeowner’s insurance premiums as a valid reason to require immediate repayment.