What is the Right of Recission?

The Right of Rescission refers to a consumer's legal ability to cancel certain types of loans within a specific time frame, typically three business days. This right is particularly relevant in the context of home equity loans and refinances under Regulation Z, which is part of the Truth in Lending Act. Its purpose is to give borrowers a chance to reconsider their commitment after signing a loan agreement, providing a safeguard against hasty decisions that could lead to financial hardship. This means that from the time of closing, borrowers can review the terms and decide if they want to back out of the transaction, ensuring they are fully informed and comfortable with the financial commitment they are making.

This protection is not applicable to all loans, which is why it is essential to understand when it can be utilized. Other options do not relate to this right; applying for a loan modification, paying off loans early, or dealing with late payment fees do not encompass the specific legal ability to rescind a loan agreement within the stipulated time frame.