Acceleration

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A delinquent counterparty, borrower, or other miscreant can “default” on a contractual obligation without (necessarily) incurring the full, balls-out wrath of his lender. Sure, the lender may be utterly exasperated with his cretinous client, but she may have plenty of good reasons to sit on her hands. A defaulting party is one who has failed to do what she promised, whether or not the non-defaulting party has taken any action as a result.

The process of taking that action: declaring an event of default or terminating a contract is called “acceleration”.

Becomes quite important when considering concepts like cross acceleration and cross default. Knowing what you know about acceleration from this article, can you guess what the difference might be?

See also

• Cross acceleration
• Cross default