Acceleration clause
Barron's Banking Dictionary:
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Acceleration Clause
Clause in a mortgage bond or promissory note stating that the unpaid balance is payable if specified conditions of default, defined in a loan Covenant or bond Indenture should occur. Acceleration, exercisable at the option of the lender, calls for immediate payment of the remaining balance, plus interest due. See also Credit Event.
Barron's Real Estate Dictionary:
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Acceleration clause
A loan provision giving the lender the right to declare the entire amount immediately due and payable upon the violation of a specific loan provision, such as failure to make payments on time. If this clause were not present, then a default on one payment would be just that: only one payment in default. This clause makes the full amount of principal due upon the default as specified in the loan.
Example: Collins sells her house to Baker, who assumes the existing 8% interest rate mortgage. They do not notify the lender of the sale. Clause 17 in the mortgage states that the full principal accelerates unless the lender approves of the sale. Collins must now pay the balance of the principal.
Example: Collins sells her house to Baker, who assumes the existing 8% interest rate mortgage. They do not notify the lender of the sale. Clause 17 in the mortgage states that the full principal accelerates unless the lender approves of the sale. Collins must now pay the balance of the principal.
| Accelerated Depreciation, Accelerated Cost Recovery System (ACRS) | |
| Acceptance, Access Right |
West's Encyclopedia of American Law:
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Acceleration Clause
This entry contains information applicable to United States law only.
The provision in a credit agreement, such as a mortgage, note, bond, or deed of trust, that allows the lender to require immediate payment of all money due if certain conditions occur before the time that payment would otherwise be due.
The agreement may call for acceleration whenever there is a default of any important obligation, such as nonpayment of principal or interest, or the failure to pay insurance premiums.
Investopedia Financial Dictionary:
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Acceleration Covenant
A clause included in certain debt securities and swap agreements stating that the immediate collection of payment and termination of contract will take place should any number of clauses being violated by the borrower including default or a downgrade of debt.
Also referred to as "acceleration clause."
Investopedia Says:
This covenant helps to protect parties that extend financing to businesses in need of capital. Under an acceleration covenant, the borrowing party must maintain a specified credit rating in order to prevent termination of the contract and immediate repayment.
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Wikipedia on Answers.com:
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Acceleration clause
An acceleration clause, in the law of contracts, is a term that fully matures the performance due from a party upon a breach of the contract. Such clauses are most prevalent in mortgages and similar contracts to purchase real estate in installments.
Suppose, for example, the contract was for A to purchase Blackacre from B for $100,000, to be paid in 5 monthly installments of $20,000. If A makes the first two payments, but fails to make the third payment, an acceleration clause would require that A must immediately pay B the entire balance of $60,000, or lose his right to purchase Blackacre (without getting a refund of his $40,000).
A sample acceleration clause reads like this:
- In the event of default in the payment of any of the said installments or said interest when due as herein provided, time being of the essence hereof, the holder of this note may, without notice or demand, declare the entire principal sum then unpaid immediately due and payable.
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Copyrights:
Barron's Banking Dictionary
Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.
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Barron's Real Estate Dictionary
Dictionary of Real Estate Terms. Copyright © 2008 by Barron's Educational Series, Inc. All rights reserved.
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West's Encyclopedia of American Law
West's Encyclopedia of American Law. Copyright © 1998 by The Gale Group, Inc. All rights reserved.
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Investopedia Financial Dictionary
Copyright ©2010, Investopedia.com - Owned and Operated by Investopedia US, A Division of ValueClick, Inc. All rights reserved.
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