What clause allows a lender to call a loan due upon default by the borrower?

The clause that allows a lender to call a loan due upon default by the borrower is the acceleration clause. This specific provision in a loan agreement gives the lender the right to accelerate the repayment of the loan amount if the borrower fails to meet the terms of the loan, such as making timely payments. When a default occurs, the lender can require the full remaining balance of the loan to be paid immediately rather than waiting for the normal repayment schedule.

An acceleration clause is critical for lenders as it protects their financial interests, providing a mechanism to mitigate potential losses from defaults. By activating this clause, lenders can take swift action to recover the owed amounts, which might include legal proceedings or initiating foreclosure on the collateral securing the loan.

The other clauses mentioned serve different purposes. For example, the alienation clause pertains to the transfer of property ownership and may require payment in full if the property is sold. The default clause generally outlines the conditions that constitute a default but does not specifically address the lender's rights to call the entire loan due. The due-on-sale clause is specifically related to property sales and transfers, requiring the borrower to pay off the loan in full if they sell the property. Each of these clauses plays a distinct role in the context of real estate finance