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Home Equity & Demand Loans

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Question: 
Is a home equity loan considered a demand loan? Can the bank demand immediate payment at any time if you are current with your payments?
Answer: 

I think this one would depend on contract, state law, and disclosure issues.

  1. Contract. Does your contract specify a demand feature. Many contracts contain demand features as part of remedies for default, but this is not the same thing. If your contract does not stipulate a demand feature allowing you to call the loan at your option, then you can't do it unless the borrower is in default and your default remedies include calling the loan.
  2. State law. Does state law allow for demand provisions in this type of contract. Many states have protective consumer rules. Typically, demand features would be more common in a commercial transaction. Even if your contract stipulates a demand clause, state law may make that provision inoperable.
  3. Disclosures. Reg Z requires the disclosure in TIS disclosures of any demand feature of any consumer purpose loan subject to Reg Z. If you don't disclose it, I wouldn't recommend exercising it.



First published on BankersOnline.com 6/4/01

First published on 06/04/2001

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