What does an acceleration clause do?

An acceleration clause is a provision typically included in loan agreements that allows the lender to declare the entire outstanding balance of the loan due immediately if the borrower defaults on the terms of the agreement. This means that if the borrower fails to make payments or breaches other terms of the contract, the lender has the right to demand the total amount owed rather than waiting for regular payment schedules to continue.

This clause serves as a protective measure for lenders, ensuring that they can act swiftly to recover their funds if a borrower fails to uphold their obligations. In the context of the other choices, while they address various aspects of loan agreements or property sales, they do not accurately describe the fundamental purpose of an acceleration clause, which specifically relates to the immediate enforcement of the loan repayment upon a borrower's default.