What is an acceleration of debt?
An acceleration clause allows the lender to require payment before the standard terms of the loan expire. Acceleration clauses are typically contingent on on-time payments. The terms of the loan include an acceleration clause which states the borrower must repay the remaining balance if one payment is missed.
What is cross-default debt?
Cross default is a provision in a bond indenture or loan agreement that puts a borrower in default if the borrower defaults on another obligation. For instance, a cross-default clause in a loan agreement may say that a person automatically defaults on his car loan if he defaults on his mortgage.
What is cross-default and cross acceleration?
A cross-acceleration clause is similar to the cross-default clause, except that the debt under the other debt agreement must have been accelerated or otherwise been made to be due and payable in full prior to its stated maturity before the default under the credit agreement is triggered.
What is the purpose of an acceleration clause in a mortgage?
An accelerated clause is a term in a loan agreement that requires the borrower to pay off the loan immediately under certain conditions.
What happens when your loan is accelerated?
An acceleration clause is a provision in your mortgage agreement that defines when and how the lender can “accelerate” the full repayment of the loan. In other words, it accelerates the repayment of what you borrowed plus the interest that accrues after the clause is triggered until full repayment occurs.
What does acceleration mean in mortgage?
An acceleration clause is a condition inside a contract that allows a lender to “accelerate” the repayment of your loan if certain conditions aren’t met. The acceleration clause will outline the different situations a lender can demand loan repayment and how much repayment is required.
What is cross acceleration?
Cross Acceleration means any Debt of the Company or any of its Subsidiaries is cancelled, or declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).
What is cross acceleration in ISDA?
Cross acceleration – the cross default clause is effectively downgraded, such that the non-defaulting party to the third party agreement has to accelerate the indebtedness and take proceedings to terminate the third party agreement before the non-defaulting party under the ISDA is able to declare an Event of Default.
Can banks cross collateralize?
Cross collateralization clauses can easily be overlooked, leaving people unaware of the multiple ways they might lose their property. Financial institutions often cross collateralize property if a customer takes out one of its loans and then follows up with other financing from that same bank.
What is a cross acceleration clause?
A clause which operates by defaulting a borrower under Agreement A when it defaulted under Agreement B and the lender under Agreement B accelerates repayment. A cross-acceleration provision effectively gives the lender under Agreement A the benefit of the default provisions in Agreement B.
Why is cross-collateralization bad?
Another major downfall of cross collateralisation occurs if you want to sell one, or more, of your properties. This is because you are essentially changing the terms of your contract with your lender. By selling one property you are taking it away from your lender as security and changing your loan-to-value ratio.