No loan structure is perfect and it is up to both the lender and the borrower to come up with a system that works best for them. One of the biggest drawbacks is that there is a very high likelihood that the loan balance might pile up to a very large amount. You will continuously be charged interest on demand loan, even at times when you have not yet started making the payments at the beginning of the repayment period, the interest would be adding up. The balance tends to grow larger if the initial amount paid is lesser. Though the ability and the flexibility to repay at your own pace can be advantageous at times, it can be rather difficult to plan for the future with such a loan. The biggest risk here comes in thanks to the ability of the lender to call back the loan at any point of time. This virtually means that the borrower has to maintain the amount of money in ready cash at all times and in the absence of it, might be forced into drawing another loan. This type of loan is not advantageous unless there is very good business understanding between the borrower and the lender.
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