What does the Acceleration Clause allow a lender to do?

The Acceleration Clause is a provision found in many loan agreements that allows the lender to demand full repayment of the outstanding balance on the loan if certain conditions are met, typically related to the borrower's default. In this case, the correct answer indicates that if the borrower is delinquent for a specified period, such as 120 days, the lender can call in the entire loan balance. This clause serves as a protective measure for lenders, enabling them to mitigate potential losses if they believe the borrower is unable or unwilling to continue making payments. By accelerating the loan, the lender can act quickly to recover their funds, thereby reducing their risk.

Other options, such as extending loan terms, dismissing the loan, or renegotiating the loan agreement, do not align with the primary function of an Acceleration Clause, which specifically pertains to enforcing repayment terms in the event of default.