Acceleration clause: calling the whole loan after a default

Sample clause

Written for an equipment loan from Northwind Finance, a fictional lender, to Pinjarra Earthmoving, a fictional earthmoving business, to buy an excavator.

Acceleration. (a) Each of the following is an Event of Default: (i) the Borrower fails to pay any amount when due and does not pay it within 14 days after the Lender gives written notice of the failure; (ii) the Borrower breaches any other obligation and does not remedy it within 30 days after written notice, if it is capable of remedy; (iii) an Insolvency Event occurs in relation to the Borrower. (b) At any time after an Event of Default and while it continues, the Lender may by written notice declare all amounts owing under this agreement immediately due and payable, and the Borrower must pay them within 5 business days. (c) If the Borrower pays all overdue amounts and the Lender's enforcement costs before the Lender gives notice under paragraph (b), the Event of Default is treated as remedied.

Sample wording, not legal advice.

Variants

What to negotiate

• Cure periods

  Borrowers should ask for a grace period for missed payments, such as 5 to 14 days after notice, and a longer period for other breaches that can be remedied. Lenders resist long periods for payment defaults but often accept them for technical breaches. A cure period stops a single late payment from putting the whole loan at risk.

• Which defaults trigger it

  The list of events of default decides when acceleration is available. Borrowers should resist triggers that are subjective, such as the lender considering a material adverse change has occurred, and those tied to other debts unless they meet a threshold. A cross default clause can make a default elsewhere a default here, which multiplies the risk.

• The lender's discretion

  Notice based acceleration gives the lender a choice; it may decide to waive the default or renegotiate. Borrowers should seek a provision that once a default is remedied, the right to accelerate for it ends, as in the sample. Lenders should avoid conduct that could be read as waiving a default, such as accepting late payments without reservation.

The risk of leaving it out

Without an acceleration clause, a lender facing a default can generally sue only for instalments as they fall due, which can mean waiting years while the borrower's position worsens, and enforcing security may be harder. For borrowers, the clause is a major risk, so the events of default and notice periods are where they should negotiate.

Default notice rules

Australia: for credit regulated by the National Credit Code, section 88 requires the credit provider to give a default notice allowing at least 30 days to remedy before it can begin enforcement proceedings, which includes accelerating, with limited exceptions. United Kingdom: under the Consumer Credit Act 1974, section 87, a default notice is needed before the creditor can terminate a regulated agreement or demand earlier payment, and the notice must give the debtor at least 14 days to remedy. United States: residential mortgages commonly follow uniform instruments that require notice of the default and at least 30 days to cure before acceleration, and state law adds further protections. Business loans are mostly governed by the contract. Law checked on 21 October 2026. This page explains how the clause works and is not legal advice.

Acceleration and enforcement of security

Once a loan is accelerated, the whole amount is due, and if it is not paid the lender can usually enforce its security, such as repossessing the excavator in the sample. For personal property in Australia, enforcement is also governed by the Personal Property Securities Act 2009. Lenders should follow the notice requirements of both the loan and the security documents exactly, because a defective notice can invalidate the enforcement.

Reversing an acceleration

Some loans allow a borrower to reinstate the loan after acceleration by paying the arrears and costs, and US mortgage instruments often give a reinstatement right before foreclosure. Under the National Credit Code, a debtor who remedies within the default notice period prevents enforcement. Commercial borrowers can ask the lender to rescind an acceleration notice as part of a workout, which lenders often agree to when a payment plan is reached.

Where the clause sits

Events of default and acceleration usually sit together near the end of a loan agreement, after the representations and covenants. In a loan agreement drafted with the AI document generator, ask for the events of default as a numbered list, the cure periods for each, and the acceleration clause, so the borrower can see the whole path from missed payment to demand.

Documents that carry this clause

Loan agreement templateA Tasmanian foundry is borrowing $180,000 from a private investment company to buy a used induction furnace. The lender is not a bank, so everything a bank would take for granted has to be written down: what has to happen before the money moves, what is registered over what, and how long the borrower gets to fix a default.Promissory note templateA timber company owes $45,000 to a private lender and needs one page that says so. No conditions precedent, no covenants, no security. Only the maker signs, which is what keeps a note short and what lets the holder pass it on to somebody else.Notice of default template that gives a real chance to fix itA notice of default has to identify the loan, show exactly what is overdue, give the borrower a fixed date to put it right, and say what happens if they do not. This one page notice from a private lender after two missed instalments on an $18,000 business loan does that with an arrears table, a 30 day cure period and the acceleration clause quoted.

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