Definition of Acceleration Clause

Acceleration clause is a loan agreement clause that makes the borrower repay the loan amount in full before the term of the loan expires. The acceleration clause is like a trigger that will be in effect if certain reasons mentioned in the acceleration clause occur. In most cases, the basic reason for the acceleration clause is the non-payment of the loan installment on time.

An acceleration clause for some agreements allows the borrower to miss up to three installments, but mostly it is one payment that if skipped the borrower will have to pay off the loan’s remaining amount in full immediately. The borrower will not be liable to make any interest payments thereafter as the loan is paid in full.