What do you mean by demand loans?

Demand loans, also known as demand financing or callable loans, are short-term loans that can be recalled or repaid by the loan provider at any time. These loans do not have a specific maturity date or repayment schedule.

The key features of demand loans are:

• Flexible Repayment: There is no fixed repayment structure. The applicant can pay interest and repay the principal at any time.
• Due on Demand: Loan providers can demand full repayment of the loan at any time, even if the borrower makes timely payments.
• Short-Term: Demand loans are typically used for short-term financing needs. The duration ranges from a few days to 1-2 years.
• Variable Rates: Interest rates on demand loans are usually variable and tied to a benchmark rate like Marginal Cost of Funds based Lending (MCLR) or an external benchmark. The loan provider can periodically revise rates.
• Collateral: Demand loans usually require pledging securities, deposits, or other assets as collateral to secure the loan.

In summary, demand loans offer quick and flexible financing but expose the applicant to untimely recalls. The uncertainty of repayment timing makes them ideal only for short-term needs where funds may be required on short notice.