Which clause specifies the conditions when a lender can demand loan repayment due to borrower default?

The acceleration clause is a vital component in loan agreements that serves as a protective measure for lenders. It allows the lender to demand the full repayment of the outstanding balance of a loan when certain conditions are met, typically upon the borrower's default. This means that if the borrower fails to make timely payments or violates other terms of the loan, the lender can accelerate the repayment process, requiring the borrower to pay off the loan in full immediately rather than following the originally scheduled payment plan.

This clause is essential for lenders as it minimizes their risk, enabling them to take preemptive actions if the borrower is unable to fulfill their financial obligations. By having the capability to invoke the acceleration clause, lenders can recover their loan amounts more quickly when they observe signs of default.

In contrast, the other clauses mentioned serve different purposes. The due on sale clause allows the lender to demand full payment if the property is sold, not necessarily linked to borrower default. The alienation clause is often similar to the due on sale clause, relating to the transfer of the property. The balloon clause indicates a final larger payment due at the end of a loan's term, which does not inherently create conditions for demanding repayment due to default. Each of these has its specific function in loan agreements