Cross-default versus cross-acceleration: A cross-default gives the lender the ability to trigger a default under one loan agreement if the borrower is in default under another agreement. These provisions allow the lender to accelerate all amounts due under the loan. Acceleration clauses may be of different nature and may have different triggers, depending on what was agreed upon when taking on the loan. But, like most things in life, there are two sides to the coin. The good news is, the borrower is generally able to avoid acceleration by working out a loan modification or repayment plan with his or her lender to make up the delinquent payments; this is called. Because lenders aren’t in the business of selling real estate, this can be a costly proposition, and they often don’t get enough back to pay off the investment. Interest rates are charged by the lender on a borrower. 1Based on Quicken Loans data in comparison to public data records. Here borrowers are released from the lender only once the property is transferred to the new owner. What Triggers an Acceleration Clause in a Loan Agreement? interest as a basis to trigger the acceleration clause and demanded repayment of the full loan amount, in the sum of R7 665 040.14. An accelerated clause is typically invoked when the borrower materially breaches the loan agreement. The acceleration clause will outline the different situations a lender can demand loan repayment and how much repayment is required. But, like most things in life, there are two sides to the coin. If the borrower is successful in paying the full amount to the lender, he gets the ownership of the house but if he fails to honor payment, then it is considered a breach of contract, and the lender gains the right to cease the property of the borrower. Trigger for Acceleration Clause #1 – Inability to Pay Interest Payment. An acceleration clause means that, if certain conditions are met, the borrower will have to pay back the entire loan at once – including the interest that accrued since the clause was invoked. An acceleration clause or covenant is majorly used in mortgage loan agreements, swap agreement and real estate loan contracts. In the loan agreements at issue, the parties enumerated specific events that would trigger the right to accelerate the loans. However, there could be severe cases of acceleration after only one missed payment. Because lenders prefer not to own real estate, there is usually a variety of options available for borrowers to choose from to get back to being current on their loan payments. What can trigger an acceleration clause? Acceleration Triggers the Statute of Limitations The applicant relied heavily on the unanimous decision of Chatrooghoon v Desai 1951 (4) SA 122 (N). The applicant relied heavily on the unanimous decision of Chatrooghoon v Desai1951 (4) SA 122 (N). Here we discuss the triggers of the acceleration clause and example along with advantages and disadvantages. An Acceleration clause or contract is a law that permits a lender to demand an entire loan when the other party breaches a loan agreement. Accelerated restaurant service means you get your food faster. In 2004, Robert Imbody (“Imbody”) financed the purchase of a truck through Fifth Third Bank (“Bank”). However, the borrower doesn’t have to pay any forward interest that would have been owed if the mortgage had lasted for the full term. If your lender triggers an acceleration clause, you’ll get a letter in the mail. Here’s a common provision: The prospect of that will give anyone pause. If the borrower breaches the restrictions, the lender can trigger an accelerated clause and demand full repayment. A cross-acceleration provision effectively gives the lender under Agreement A the benefit of the default provisions in Agreement B. 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