The world of bank loans can be incredibly confusing and incredibly complex. There are a seemingly endless amount of loans that people can choose from when they need a loan. There are certain types of separate loans, such as personal loans, car loans, and home loans. There are also specific types of loans within each type of loan. One of these types of loans is the demand loan. For some, the demand loan may be the perfect loan for their needs. For others, the demand advance could easily be too risky.
A demand lend is simple. Also known as a call loan, a demand lend can be called for at any time. There is no specific timetable that the person receiving the loan should follow for payment. They are allowed to make payments on a regular basis. The lender can actually call for the loan at any time, however. This means that the person who has given the advance can tell the person who was leant the money that they want it paid back in full. The person who took out the loan must pay back the loan in full within a given amount of time once the credit is ‘called’.
For some, the demand loan is perfect. Those who have the money stowed away but would rather not spend it are perfect for a demand lend. They have the financial security of still having that money saved. They can make payments over time, and will have the money ready and available when the credit is actually called. While it may still be slightly risky, it can be the best-case scenario for those who need to keep money in their savings accounts, but need to make a large purchase.
For some, the demand lend is far too risky to be considered. The demand loan can call for the money at any time. If you do not have the money available, you will be followed by debt collectors. A collection agency may take the steps to file charges for an unpaid credit. This could result in you losing valuable assets, including your car and your home. If you do not have the money to back up a demand loan, you are not going to want to venture into one. The idea of making payments whenever you want may be intriguing. The results of you being called on for the loan when unprepared can be devastating.
A demand loan is still a viable loan option. For some, the demand loan is going to be a perfect loan type. For others, the demand loan is going to be too much to handle. If you are thinking about going into a demand loan, you need to seriously understand your options. You need to plan for the worst case scenario. What happens to you if they call for the loan when you are unprepared? Knowing the answer to this question can easily help you to decide whether or not the credit type is right for you.
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Demand Loan FAQ:
Question: As the bank recovered the amount twice for the same demand loan, what is the remedy available as the bank is not acknowledging the e-mails ,fax & speed post?
The only reply is “matter reported to head office” after the gap of 33 months for which no reply or report made available to the complainant till date.
Answer: You may be having record of payment. You may be having a No due certificate. Fax it to the Managing Director of the Bank along with your claims letter and a copy to the Reserve Bank. You will get your money back if it is recovered twice. Claim interest and compensation also. Normally, a complaint is supposed to be squared off within a month.
Question: How do I calculated the imputed interest on a short-term loan?
I know to use the applicable federal rates to find the imputed interest, but I’m not sure if there if there is a specific way to calculate. Assume a $20,000 short-term (1-3 year) demand loan.
Answer: Date of deposit to date of deposit. If no payments are made, do it with the annual rate on 12/31.
Question: Help calculating compound interest in this question?
A demand loan of $3000.00 is repaid by payments of $1500 after two years, $1500 after four years, and a final payment after seven years. Interest is 9% compounded quarterly for the first year, 10% compounded semi-annually for the next three years, and 10% compounded monthly for the remaining time. What was the size of the final payment?
I’m having trouble setting it up. I’m especially unsure on how to start as a payment as made after two years yet the interest changed the first year?
Answer: 1st year – 9% of balance once every 3 months. Don’t forget to add the interest onto the balance due once every three months, and multiply the whole number (principal plus interest) by 0.09 each time.
Year 2, 3, 4 (next 3 years) – do the same multiplication of principal and interest at 0.10 but only twice each year. Don’t forget to subtract the $1,500 payment at the end of year 2 and 4.
Year 5, 6, and 7 – multiply the balance by 0.10 every month of each of these years, adding the interest each time to the balance due.
End of year 7 – total due of interest plus principal.
Question: Loan to child?
I understand that there is a $100,000 rule for avoiding taxation on demand loans. Would it be legal for me to make a $100,000 interest-free demand loan to my daughter and son-in-law, for my wife to make another $100,000 interest-free demand loan to them and perhaps my brother to make a third interest-free $25,000 demand loan to them, securing these loans against their home, recording the loans and signing an agreement with them to give us up to $12,000 in gifts per year, rather than interest, along with their principle payments, with no itemized deductions by them and no income tax by us?
Answer: Form over substance is an issue. You want to make $225K in loans and pretend that it’s below $100K.
You are also telling us that your daughter and son-in-law are going to share their tax returns with you–because the $100K rule doesn’t say these are interest free loans, only that the amount of interest is limited to the net investment income for the year. If they’ve got checking account interest, savings account interest, CDS, bonds, capital gains of any sort, you would have interest income.
The gifts aren’t gifts if you spell them out in the loan. They would clearly be interest.
Question: What is a demand loan?
Answer: A loan that must be repaid in full, on demand
Question: Will this action hurt my credit score?
I currently have good credit. I have a Cash on Demand loan-type card that I’m already paying high interest on. I recently received a notice from my bank telling me that the interest rate will increase in August.
I can either close the card/account and keep my current interest rate, or take no action and keep the account while the rate increases in August. I have NO desire to keep using this account once it is paid off, but my balance is too high at the moment for me to pay it off before August.
Will closing this account now, while it still holds a balance, harm my credit in any way?
Answer: Yes it will lower your score. The reason being, if the account is closed (no matter who closes it) you loose the credit limit which is used to determine your debt utilization ratio. This is the amount owed compared to your total available credit line.
If that account has a credit limit of lets say $5000 and you loose that line of credit, your current balances owed will increase your debt utilization ratio.
You should never exceed 30% of your total debt utilization, and if possible keep it under 10% for a higher score.
Once you have paid them off, then go ahead and close the account because once paid your debt utilization will be 0% on that account and will not affect your score providing your remaining accounts are close to being paid off or are paid off.
Question: Question for loan officers or attorneys?
My husband and I have been divorced since September of 2007. Back in 2005 my ex husband cashed a draft check that came through the mail for 3500.00. Both of our names were on this draft loan because it was through our mortgage company. As of December the amount left on this draft loan was 367.85. I took out a cash and demand loan through the mortgage company. This is a different loan that is solely in my name. However the 367.85 was transfered to my loan because it also had my name on the draft loan. My problem is I never corrected them about my marriage status and I was divorced at that time. We were still living together as we were trying to sell the house. It is listed in the divorce decree that he is to pay this loan off. He is refusing to pay because during the move (we sold the house), he is missing a camera that he said he thought I stole, so he is withholding the 367.85. Can I get in trouble for the loan I took out because I didn’t say we were divorced?
Answer: As long as his name is no where near it, you should be fine. Cut your ties and move on. You owe the $367 because it is in your name, You don’t want a court case because of a few hundred dollars so make sure it gets paid off. The bank does not care about your divorce, all they want is the money. Think of your own credit, it will be damaged if you don’t repay it and that is the only real trouble you are in.