Short answer: the federal 3 day right to cancel a loan, called the right of rescission, applies to credit secured by your principal dwelling, and not to a mortgage used to buy the home (12 CFR 1026.23). An unsecured personal loan is not secured by your home, so that right does not apply to it. If you change your mind, read your contract for any right to cancel, and ask the lender how to pay the loan back early; you will usually owe the interest for the days you had the money.
Which cancel rights exist
| Right | What it covers | Deadline |
|---|---|---|
| Right of rescission (Truth in Lending) | Credit secured by your principal dwelling, such as a home equity loan or line of credit. Not a mortgage to buy the home, and not a refinance by the same lender except for new money (12 CFR 1026.23(a), (f), 1026.15) | Midnight of the third business day after signing, getting the rescission notice or getting all material disclosures, whichever is last (1026.23(a)(3)) |
| FTC Cooling-Off Rule | Certain sales of goods and services made at your home, workplace or dormitory, or at a seller's temporary location. Not sales made entirely online, by mail or by phone (FTC) | Midnight of the third business day after the sale (FTC) |
| Your contract or state law | Some contracts and state laws give their own right to cancel; for example, one state lets a borrower cancel a short-term loan by returning the amount by 5 p.m. on the third business day (Ohio Rev. Code 1321.39) | As the contract or law says |
The Cooling-Off Rule is about buying goods and services, and it does not apply to a sale where you already have the right of rescission (16 CFR 429.0(a)(2)). If a seller signed you up for financing at your door, ask about canceling the sale itself.
If your loan is secured by your home: the dates
For rescission, a business day is every calendar day except Sundays and federal holidays (12 CFR 1026.2(a)(6)). Example: you sign on Monday, November 9, 2026 and get the notice and all disclosures when you sign. Saturday counts, Veterans Day (November 11) does not (our count):
| Step | Rule | Example date |
|---|---|---|
| Last day to cancel, by midnight | Third business day (1026.23(a)(3)) | Friday, November 13 |
| Lender returns money you paid and ends the lien | Within 20 calendar days after it receives your notice (1026.23(d)(2)) | By Thursday, December 3, if your notice arrives on Friday, November 13 |
Cancel in writing: by mail, or another written way; a mailed notice counts when you mail it (1026.23(a)(2)). When you rescind, you are not liable for any amount, including any finance charge, and you return the money you received after the lender has done its part (1026.23(d)). If the notice or the material disclosures were never delivered, the right can last up to 3 years (1026.23(a)(3)).
If it is an unsecured personal loan
- Read the contract and the disclosure for any right to cancel or return the funds, and for a prepayment penalty (how to read a loan disclosure).
- The disclosure must say whether you may have to pay a penalty if you pay off early, and for a loan with precomputed interest, whether you get a refund of part of the finance charge (12 CFR 1026.18(k)). See prepayment penalties.
- Call the lender, say you want to pay the loan off now, and ask for a payoff amount good through a set date, in writing.
- Ask whether any origination fee is refunded, and whether optional add-ons such as credit insurance can be canceled for a refund (credit insurance on a personal loan).
- If autopay is set up, end it only after the loan is paid in full; see how to stop automatic loan payments.
What paying it back early can cost
Example, not a quote: $3,000.00 at a 20% rate with a $150.00 origination fee, paid back after 10 days. Assuming simple interest that builds daily and no prepayment penalty: $3,000.00 x 20% x 10 / 365 = $16.44 in interest, so the payoff is about $3,016.44. If the fee is not refunded, the short loan cost you $166.44. Your lender's payoff figure is the one that counts.
If you want a different loan rather than none, see refinancing a personal loan. If a lender will not give you a payoff amount or keeps charging after you paid, you can file a complaint.
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Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.
Sources
- Regulation Z, 12 CFR 1026.23: right of rescission (closed-end credit secured by your home)
- Regulation Z, 12 CFR 1026.15: right of rescission (home-secured credit lines)
- Regulation Z, 12 CFR 1026.2(a)(6): business day
- FTC: Buyer's Remorse: The FTC's Cooling-Off Rule May Help
- 16 CFR 429.0: definitions, FTC Rule Concerning Cooling-Off Period for Sales Made at Homes or at Certain Other Locations
- Ohio Revised Code 1321.39: Short-term loan requirements and restrictions (effective October 29, 2018)
- Regulation Z, 12 CFR 1026.18(k) Prepayment (disclosure)