acceleration clause


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Acceleration clause

A contract stating that the unpaid balance becomes due and payable if specific actions transpire, such as failure to make interests payments on time.

Acceleration Clause

A clause in a contract, especially a loan or bond, allowing a creditor to call the debt if certain, stated events occur. For example, if a borrower defaults on two or more payments, an acceleration clause may allow a lender to force the borrower to repay the entire amount of the loan immediately. Failure to repay could absolve the lender of all obligations in the contract, including the requirement to refund any money the borrower had previously paid, and render it effectively null and void.

acceleration clause

A provision in a bond indenture that in the event of default allows the trustee or the holders of 25% of the principal amount of the outstanding issue to declare all of the principal and interest immediately. Calling for an acceleration is likely to cause the borrower to cure the default or seek bankruptcy protection.

acceleration clause

The clause in a promissory note or lease that allows immediate demand,upon default,for all sums due over the entire term.

Acceleration Clause

A contractual provision that gives the lender the right to demand repayment of the entire loan balance in the event that the borrower violates one or more clauses in the note.

Such clauses may include sale of the property, failure to make timely payments, or provision of false information.

I have never seen a note that did not have such a clause. Borrowers need not concern themselves with it except where the lender has discretion to exercise it without conditions. This would be referred to as a “demand feature,” and it would be flagged on the Truth in Lending Disclosure Statement. If that statement shows “This loan has a Demand Feature…,” the note should be read with care. See Demand Clause.

References in periodicals archive ?
1963) ("[A]n election to accelerate puts all future installment payments in issue and forecloses successive suits."); Johnson, 1997 ME 220, [paragraph] 8, 704 A.2d at 869 ("Once Johnson triggered the acceleration clause of the note and the entire debt became due, the contract became indivisible.
Note that some lockbox arrangements do not go into effect unless the lender exercises a subjective acceleration clause (a springing lockbox).
78, a subjective acceleration clause is defined as "a provision in a debt agreement that states that the creditor may accelerate the scheduled maturities of the obligation under conditions that are not objectively determinable;" it then repeats the above phrases as examples.
79-3 are inconsistent in their treatment of subjective acceleration clauses in debt agreements.
Nonetheless, it is our view that there are important practical advantages to a landlord in providing, as an additional and alternative remedy to form Lease [paragraph]18, for an acceleration clause. For example, where a landlord is holding a security deposit, but the tenant is threatening to file for bankruptcy, the landlord may be able, if there is an acceleration clause, to quickly declare a termination via a conditional limitation, invoke the acceleration clause, and draw down the entire security deposit, all before the tenant is able to file for bankruptcy and thus freeze the security deposit (by reason of the bankruptcy "automatic stay").
of an acceleration clause ensures that significant principal repayments
A framework for voluntary prepayment is also introduced to complement the accelerated-repayment clause, by enabling and encouraging the prepayment of ADF loans that currently do not contain the acceleration clause. This framework allows the Fund to offer financial incentives to graduated countries when they decide to prepay their ADF loans.
"Crisil understands that many of the investors in NCDs with acceleration clauses have not yet exercised their acceleration rights.
The loan will expire in 2024, creating refinancing risk, and also contains acceleration clauses. Fitch views these terms negatively as it places a significant amount of control with the bank as certain events of default can be cured or waived by the bank to prevent an acceleration of debt.
"The CreditWatch reflects our view of an increasing risk of Mozambique on its debt, either as a result of higher-than-expected debt service obligations, or due to acceleration clauses in the government's external commercial debt.
Moody's notes that, while MTS does not have any cross default and cross acceleration clauses relating to Sistema, there is a change of control clause in MTS's Eurobond documentation, which gives bondholders the right to put the bonds if more than 50% of MTS's shares are transferred from Sistema to another controlling shareholder.