There are many types of loans and mortgages used these days and one of them is the demand note, which is also known as the demand loan or demand credit. This is a type of loan in which there is no specific duration mentioned in the agreement to return the loan but it only depends on when the creditor demands to the debtor to return his loan. This is type of an unsecured loan where there is no legal agreement signed between the creditor and debtor and there is collateral either as the guaranty of return of the loan. This type of loan is not very common and people only use it for personal reasons and for small amounts of loans.
Advantages and Disadvantages of Demand Note:
By understanding the above-mentioned content, it is very easy to see that even if this demand loan looks very good and convincing, there are advantages and disadvantages of this type of loan. When we talk about the benefits of demand loan, there is very low interest rate and no specific time to return the payment or pay monthly installments. This means that with the demand note, the debtor can enjoy loan with very low interest rate and absolutely freedom of mind because he is not required to make the periodic installments with the high interest rate to the creditor. This demand note also benefits the creditor as he can demand to return the loan whenever he or she wants and they don’t need to wait for the loan period to expire before asking for return of the loan capital amount.
On the other hand, this demand loan also has its setbacks and disadvantages. The biggest and most common setback of demand loan is that the creditor has the right to demand the loan anytime he wants even and the debtor is legally required and obligated to pay back the loan as per the demand of the creditor. This can create a problem for the debtor as the creditor can ask for the loan in an inconvenient time when the debtor is in financial crisis and can’t return the loan where on the other hand, this loan has also the disadvantage of no guaranty or collateral. It is possible that when the creditor demands the loan, the debtor simply refuses to pay back the loan and never return it as there won’t be any legal agreement signed between them because they are close friends or relatives.
Uses of Demand Note:
Demand note or demand loans are usually used in between friends, relatives and business partners. This is an informal type of loan that doesn’t require any legal action or formal loan agreement. Usually friends use this loan when they require money on urgent basis and they can’t specifically tell the creditor when they will not return the loan nor the creditor demands them to return the loan in a pre-defined period of time but the loan is only returned when the creditor asks or demands for the pay back of the loan.
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