Which clause allows for the immediate payment of a loan balance if fraud is detected?

The due-on-demand clause is designed to protect the lender by granting them the right to demand the immediate repayment of the outstanding loan balance under specific circumstances, such as the detection of fraud. This clause enables lenders to mitigate risks associated with borrower deceit, such as providing false information during the loan application process. If a lender identifies fraudulent activities, the due-on-demand clause allows them to take swift action to recover the loan funds, ensuring that they are not left vulnerable to further risk from the borrower.

While other clauses serve different functions—such as the acceleration clause, which allows lenders to call the entire loan amount due after certain events or the due-on-sale clause, which addresses transferring the property to a new owner—none specifically address the situation of fraud as directly and immediately as the due-on-demand clause does. This emphasis on immediate action against fraud makes the due-on-demand clause critical in protecting a lender's interests.