A demand loan differs from traditional loans, which have maturity dates and scheduled payments. Demands loans are most often  given to businesses, as opposed to individuals.

Open-Ended Repayment

Because a demand loan does not have a maturity date nor scheduled payments, the repayment of the loan is very open-ended. This is beneficial to the borrower, who can make payments when he or she can afford them. A demand loan has advantages to a person starting a new business because starting to repay a loan right away is not always possible until a company begins to generate a profit.

Payment on Demand

What defines a demand loan is that the lender can demand payment in full at any time. A demand loan is usually given only when the lender and borrower have a positive and long-standing rapport and the lender is completely confident that the borrower will repay the loan within a reasonable time frame.

A demand loan can be beneficial to the lender because the balance earns interest and finance charges until the loan is paid back.

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