What does the right of rescission allow a borrower to do?

The right of rescission allows a borrower to cancel a loan for a limited period after the loan agreement has been signed, typically three business days under federal law, such as the Truth in Lending Act (TILA). This right primarily applies to certain types of loans, particularly those involving a primary residence where the borrower has used the property as collateral. During this rescission period, the borrower can reconsider the terms of the loan and decide if they wish to proceed, ensuring they have the opportunity to review and fully understand the financial commitment they are making without penalty. If the borrower chooses to exercise this right, they can cancel the loan and receive a refund of any fees paid, thus providing a level of consumer protection.

Other options inaccurately describe the scope of rescission. For instance, canceling a loan at any time or transferring it to another party are actions not covered by the right of rescission. Additionally, forcing early repayment of a loan does not align with the intention of the rescission right, which is more about cancellation rather than repayment dynamics.