When you need quick access to funds, traditional long-term loans may not be the best fit. That’s where a demand loan comes in. Unlike regular loans with fixed repayment schedules, demand loans are short-term credit facilities that lenders can recall at any time. These loans are especially useful for businesses, traders, and individuals who need urgent liquidity.
In this article, we’ll explore the key features and benefits of demand loans and why they are a preferred option for short-term financing.
What is a Demand Loan?
A demand loan is a type of short-term loan that does not have a fixed repayment tenure. The lender can demand repayment at any time, and the borrower must repay accordingly. Typically, demand loans are offered for a period of up to 12 months, making them ideal for immediate financial needs.
Features of Demand Loans
1. Short-Term Credit
Usually granted for a few months to a year.
Perfect for urgent cash flow requirements.
2. No Fixed EMI Schedule
Unlike term loans, demand loans do not require regular monthly EMIs.
Borrowers can repay as per their cash flow.
3. Collateral Requirement
Demand loans may be secured against fixed deposits, property, or other assets.
Some lenders also offer unsecured demand loans for creditworthy borrowers.
4. Flexible Repayment
Borrowers can make partial or full repayment anytime.
Prepayment charges are usually minimal or nil.
5. Higher Interest Rates
Since the loan is short-term and flexible, interest rates may be slightly higher than long-term loans.
Benefits of Demand Loans
1. Instant Access to Funds
Demand loans are disbursed quickly, making them ideal for emergencies and working capital needs.
2. Flexible Repayment Options
Repay the loan as per your convenience and cash flow.
3. Useful for Businesses & Individuals
Businesses use demand loans for managing inventory, paying suppliers, or handling short-term obligations.
Individuals may use them for medical expenses, education, or other urgent needs.
4. Secured Against Assets
If taken against collateral like fixed deposits or property, demand loans usually have lower interest rates compared to unsecured loans.
5. No Restriction on Usage
Borrowers can use funds for any personal or business purpose without restrictions.
Who Should Consider a Demand Loan?
Business Owners needing working capital.
Individuals with short-term financial needs.
Borrowers who want quick liquidity against existing assets.
Traders requiring funds for daily operational expenses.
FAQs: Demand Loans
Q1. What is the repayment period of a demand loan?
A demand loan is usually up to 12 months, but the lender can recall it anytime.
Q2. Can I get a demand loan without collateral?
Yes, some banks and NBFCs offer unsecured demand loans based on creditworthiness.
Q3. How is interest charged on demand loans?
Interest is usually charged monthly or quarterly on the outstanding balance.
Q4. Is a demand loan good for long-term needs?
No, demand loans are designed for short-term liquidity, not long-term financial planning.
Q5. Can I prepay a demand loan anytime?
Yes, most demand loans allow partial or full prepayment without heavy charges.
Published on : 1st October
Published by : SMITA
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