Demand loan

A demand loan (also called a demand note) is a loan due at any time the lender decides to request payment, rather than on a specific date.11 Overdraft facilities, for example, are typically repayable on demand. Although the overdraft facility expires on a set date, the lender may have the right to demand its money back at any time before that date for certain reasons, or sometimes for any reason. (Loans evidenced by loan agreements or promissory notes also can be payable on demand, although this is not common market practice.) The lender can demand the money back for any reason, such as the loss of confidence in the creditworthiness of the borrower or simply its own desire for more liquidity. The reason need not have any relation to the status of the borrower, though the demand note typically will set forth certain procedural requirements the lender must satisfy to demand repayment. At the very least, a demand note should contain language requiring the lender to provide the borrower advance notice by a specified number of days if repayment is demanded before the loan expires. A longer advance notice period is advantageous to the borrower, insofar as it affords the borrower more time to obtain the funds to be repaid.