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Acceleration Clause
A loan provision allowing the lender to demand the full unpaid balance immediately upon borrower default, rather than only the missed payments.
In depth
An acceleration clause turns a defaulted loan into an immediate demand for the full principal plus accrued interest. Without it, lenders could only sue for individual missed payments. Misconception: acceleration is not automatic; the lender must usually send a written notice declaring acceleration. Practically, in seller-financed deals, the acceleration clause works in tandem with the cure period and notice of default. Once accelerated, the loan can be reinstated only if the lender consents or state law preserves a reinstatement right. Sellers should ensure their notes and contracts contain robust acceleration language. Buyers should understand that one missed payment can trigger demand for the entire balance, often hundreds of thousands of dollars, making prompt cure essential.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.