Definition - What does Acceleration Clause mean?
An acceleration clause is a contract clause that can legally compel one party in a contract to pay off the entire outstanding debt remaining if certain events occur. In many cases, an acceleration clause can be triggered if a debtor fails to make a scheduled payment on time.
These clauses are often found in real estate loan contracts.
Justipedia explains Acceleration Clause
If an acceleration clause is triggered, it can be a tremendous burden on the borrower. If a borrower triggers an acceleration clause by failing to make a scheduled payment, and they cannot pay off the entire debt, then consequences can occur. This can involve the seizing of the asset that the loan was taken out for. For this reason, it is wise for people who have acceleration clauses in their contracts to avoid defaulting on payments.