Loanfactz Definitions

Right of Rescission

When you use your home as collateral for a loan to guarantee repayment, you have three days to to cancel the contract without penalty. This is sometimes referred to as a right of rescission, or right to rescind or right to cancel and is guaranteed by the Truth In Lending Act.

Many states or maybe your contract gives you a right of rescission, but the amount of time you have to cancel may vary. State law or your contract also may specify a cooling off period, how long you have to cancel the deal once you've signed the papers. If a right of rescission or a cooling off period aren't required by law, ask that they be included in your contract.

Under the right to rescind, you have until midnight of the third business day to cancel the credit transaction. Day one begins after all three of the following occur:
1. You sign the credit contract
2. You receive a Truth in Lending disclosure form containing certain key information about the credit contract, including the annual percentage rate, finance charge, amount financed, and payment schedule
3. You receive two copies of a Truth in Lending notice explaining your right to rescind.

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