Which clause is commonly associated with the ability to demand immediate payment upon default?

• A. Late payment clause
• B. Acceleration clause
• C. Defeasance clause
• D. Usury

Answer: (B)

The main concept is how a lender can demand the entire remaining loan balance right away if the borrower defaults. This option is provided by an acceleration clause. When a default occurs, the acceleration clause allows the lender to treat the outstanding loan as due immediately rather than continuing to collect payments over the original schedule. This clause is a protective mechanism for the lender, speeding up repayment and reducing the risk of further delay.

In practice, you’ll see acceleration clauses in mortgage notes and other loan agreements, sometimes with requirements like notice or a cure period before the acceleration takes effect, and with specifics about what constitutes default and what rights the borrower retains to cure.

The other ideas don’t fit as well: a late payment clause only triggers penalties or additional interest for a late payment, not a full acceleration of the debt; a defeasance clause relates to substituting collateral or clearing a lien after the loan is paid; and usury concerns illegal interest rates, not a mechanism to accelerate repayment.