Question

12. Credit contracts often include the acceleration​ clause, the deficiency payments​ clause, and the recourse clause to give the lender options for collecting the debt. Explain each clause. What is the purpose of the insurance agreement​ clause?

Answer 1

A. Acceleration Clause is a loan requirement that will be reflecting that if the borrower misses on the payment, the entire loan comes due immediately

B. Deficiency payment Clause will be advocating that if you are not able to repay the secured loan then the lender will not just sell your asset but it will be also recovering it from your personal stake if it is not fulfilled with its claim from its selling of assets.

C. Recourse clause is clause in the loan agreement in which it will be defining that what actions the lender can be claiming in case of default by the borrower.

D. Insurance agreement clauses clause which will be defining loan requirement of a borrower to purchase credit Life Insurance that will be paying off the loan in event of passing off the borrower.