What clause in a loan document allows the lender to demand immediate repayment upon default?

What clause in a loan document allows the lender to demand immediate repayment upon default?

• A. Acceleration Clause
• B. Abandonment
• C. Absolute Title
• D. Acknowledgment

Answer: (A)

The acceleration clause is a key provision in a loan document that empowers the lender to demand the full amount of the outstanding balance to be repaid immediately if the borrower defaults on the loan. This default may occur due to various reasons, such as missed payments or breach of other loan terms. The inclusion of this clause is crucial for lenders, as it provides them with a level of security and recourse to protect their investment. When such a default is declared, the acceleration clause allows the lender to bypass the lengthy process of foreclosure or further negotiations, thus expediting the recovery of their funds. The clarity and enforceability of the acceleration clause make it a standard feature in mortgage agreements and similar loan contracts. The other options presented do not relate to the mechanism of demanding immediate repayment due to default, thus highlighting why the acceleration clause is the correct choice.

The acceleration clause is a key provision in a loan document that empowers the lender to demand the full amount of the outstanding balance to be repaid immediately if the borrower defaults on the loan. This default may occur due to various reasons, such as missed payments or breach of other loan terms. The inclusion of this clause is crucial for lenders, as it provides them with a level of security and recourse to protect their investment.

When such a default is declared, the acceleration clause allows the lender to bypass the lengthy process of foreclosure or further negotiations, thus expediting the recovery of their funds. The clarity and enforceability of the acceleration clause make it a standard feature in mortgage agreements and similar loan contracts. The other options presented do not relate to the mechanism of demanding immediate repayment due to default, thus highlighting why the acceleration clause is the correct choice.