6.2-401 - (Effective October 1, 2010) Acceleration clause in note evidencing installment loan; effect of acceleration.
§ 6.2-401. (Effective October 1, 2010) Acceleration clause in note evidencinginstallment loan; effect of acceleration.
A. Any note or other contract evidencing an installment loan or otherinstallment sales obligation with add-on interest may provide that the entireunpaid loan balance, at the option of the holder, shall become due andpayable upon default in payment of any installment without impairing thenegotiability of the note, if otherwise negotiable.
B. Upon such acceleration, the holder of the contract of indebtedness shallnot be entitled to judgment for unearned interest, but the balance owingshall be computed as follows:
1. On loans payable in equal periodic installments with an initial maturityand corresponding amortization period not exceeding 61 months, theaccelerated balance shall be calculated as if the borrower had made avoluntary prepayment and obtained as of the date of acceleration an interestcredit based upon the Rule of 78 rebate method as defined in § 6.2-403; and
2. On other loans, the accelerated balance shall be calculated under a methodat least as favorable to the borrower as the actuarial method.
C. The accelerated balance shall bear interest at the rate shown, or thatshould have been shown as the annual percentage rate under a truth in lendingdisclosure pursuant to federal law if the transaction was a consumer credittransaction.
(1987, c. 622, § 6.1-330.89; 1990, c. 338; 1991, cc. 171, 365; 2010, c. 794.)