Acceleration Clause

Full definition

An acceleration clause gives the lender the right to 'accelerate' the loan - meaning they can declare the entire remaining balance due immediately rather than waiting for the scheduled payment dates. This is a standard provision in nearly all consumer loan agreements and is typically buried in the loan terms. When acceleration is triggered: Missing 2-3 consecutive payments (the exact threshold is in your loan agreement). Filing for bankruptcy (which automatically triggers acceleration on most loans). Transferring the property or collateral without lender consent (common in secured loans). Material misrepresentation on the loan application discovered after funding. Failure to maintain required insurance on secured collateral. What happens after acceleration: The lender sends a formal notice of acceleration (sometimes called a 'demand letter') stating that the full balance is immediately due. You have a short period (typically 30 days) to cure the default (pay all past-due amounts) or contest the acceleration. If you do not cure or respond, the lender proceeds to collections, legal action, or repossession (for secured loans). Right to cure: Many state laws and some loan agreements include a 'right to cure' provision - the borrower has the right to cure the default (catch up on missed payments and fees) within a specified period after the acceleration notice, which stops the acceleration and reinstates the original payment schedule. Check your state's consumer protection laws for right-to-cure provisions. Negotiating after acceleration: If you receive an acceleration notice, contact the lender's loss mitigation department immediately. Lenders generally prefer to work out a payment plan over pursuing collection - acceleration is a legal lever to motivate response, not always the first step toward a lawsuit.

• Default
• Right to cure
• Delinquency
• Forbearance