Acceleration Clause
Definition
A loan contract provision that forces a borrower to repay the entire outstanding balance immediately if they break the loan terms, especially by missing payments.
Example
Example 1:
Chidi takes a ₦10 million business loan from a Lagos bank but misses three consecutive monthly repayments, the bank triggers the acceleration clause, demanding he repays the entire remaining balance immediately or risks losing his collateral.
Example 2:
A homeowner in Texas falls behind on his mortgage payments for four consecutive months, his lender invokes the acceleration clause, making the full outstanding mortgage balance due immediately rather than allowing further monthly installments.