Acceleration clause

An acceleration clause is a feature of a loan agreement that allows the lender to require immediate repayment of a loan. The clause is usually triggered when a loan covenant is breached or when loan payments have not been made for a certain period of time. When there is a breach, the lender has the option to accelerate payment; acceleration is not necessarily required. A lender may instead opt to restructure the underlying loan.

Acceleration clauses are intended to protect the lender from situations in which the finances of a borrower are deteriorating, so that the lender can take back borrowed funds before the borrower spirals into bankruptcy.

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