A clause that allows a lender to demand repayment of the entire loan balance upon borrower default is known as?

The term for a clause that allows a lender to demand the full repayment of the loan balance upon default by the borrower is known as an acceleration clause. This clause is designed to protect the lender by giving them the option to collect all outstanding debt immediately if the borrower fails to meet the obligations outlined in the loan agreement, such as missing payments or breaching other terms.

When a borrower defaults, the acceleration clause can be enacted to enable the lender to expedite the collection process rather than having to wait for the loan to reach its usual maturity date. This mechanism is critical in minimizing the lender's risk by ensuring they can recover their investment promptly in case of financial misconduct by the borrower.

Despite the presence of other clauses like the due on sale clause, which pertains to the transfer of property ownership, or the alienation clause, which restricts transferring the loan to another party, they do not specifically address the issue of default. The balloon clause involves a larger final payment that is due at the end of a loan term, which also does not relate to the lender's immediate recovery rights upon default. Therefore, the acceleration clause is specifically tailored for scenarios involving borrower defaults, which is why it is the correct choice in this context.