What Is Demand Loan?

A demand loan is a loan that a lender can require to be repaid in full at any time. This condition is understood by the lender and the borrower from the outset. The arrangement has advantages for both parties. Lenders like the reassurance of being able to demand repayment, whether to pursue other investments or simply to recover their principal. Borrowers like the convenience and flexibility associated with demand loans because they can repay them in full or in part at any time, without penalty. It has an open-ended repayment schedule. Borrowers can repay the borrowed amount anytime when they have a surplus amount. But they are subjected to repay the entire loan amount anytime on demand of the lender. Demand loans are sanctioned by banks or financial institutes against some kind of security as goods or stocks, shares, land building, or any other assets. In demand loans, there is no such penalty for pre-payment which is normal to other loans with a fixed lock-in period. Borrowers use demand loans for many purposes, including:

• Bridge financing
• Partnership loans
• Investment loans
• Short-term funding for new businesses
• Purchasing small assets like cars, farm animals, or used equipment
• Temporary working capital

Features Of Demand Loan

There are some benefits demand loan offers that prove helpful to the borrowers to opt for this loan. Those benefits of demand loan are as follows:

• Demand loans are basically secured loans granted by the lenders against collateral
• Borrowers need to pay the interest only on the used amount
• Borrowers don’t have to worry about long-term EMIs
• Borrowers have the flexibility to make a small payment until they are eligible to pay the whole amount
• The loan amount or tenure is fixed by the lenders in consultation with the borrower
• The loan tenor shall not be less than seven days
• The loan component can be split by the banks, with different maturity periods as per the needs and requirements of the borrowers