What does the Demand Feature indicate in a loan agreement?

What does the Demand Feature indicate in a loan agreement?

• A. Lender demands full payment (usually due to default)
• B. The interest rate may reset after 3 years
• C. The borrower may request a loan modification at any time
• D. The property may be repurchased by the seller

Answer: (A)

The demand feature is about acceleration of the loan: it lets the lender require immediate repayment of the entire outstanding balance, usually if the borrower defaults or breaches a loan covenant. This is a strong remedy that makes the loan “due on demand” rather than payable on the original schedule. It’s not about changing the interest rate after a set time, nor about the borrower requesting a modification, nor about a seller repurchasing the property. So the correct understanding is that the lender can demand full payment on demand, typically when default occurs.

The demand feature is about acceleration of the loan: it lets the lender require immediate repayment of the entire outstanding balance, usually if the borrower defaults or breaches a loan covenant. This is a strong remedy that makes the loan “due on demand” rather than payable on the original schedule. It’s not about changing the interest rate after a set time, nor about the borrower requesting a modification, nor about a seller repurchasing the property. So the correct understanding is that the lender can demand full payment on demand, typically when default occurs.