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Acceleration Clause

Usually upon the violation of a specific loan term, such as missing a payment, a lender has the right to accelerate the repayment of the entire principal amount. Without such a provision, then a default on one payment wouldn't escalate past the one defaulted payment. Acceleration clauses make the full amount of principal due upon the default as specified in the loan documents.

Example: Carmen sells her house to Connor, who would like to assume the existing mortgage. Carmen fails, however, to notify the lender of the sale -- and the mortgage states that the full principal balance amount accelerates unless the lender approves of the sale. Carmen must now pay the full balance of the principal amount of the loan.