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Loan Acceleration

Definition - What does Loan Acceleration mean?

Loan acceleration is a finance concept in which a borrower must pay the full remaining balance on a loan to a lender if he or she misses a payment. In the context of the law, many loans come with "acceleration clauses" which state that loan acceleration must go into effect if the borrower misses a payment.

Justipedia explains Loan Acceleration

Loan acceleration can be extreme for borrowers if they are forced to do it. For example, if a couple owes $200,000 on a mortgage and they miss a payment, they would have to pay their mortgage lender the $200,000 immediately. This could present a serious problem for the couple if they do not have the money.

In a way, loan acceleration acts as insurance for the lender. This is because the lender will either instantly get the full amount back if there is a default, or he or she may be able to foreclose on the borrowers.

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