Right of Rescission
Also known as: cooling-off period, right to cancel
A federally mandated right under the Truth in Lending Act (TILA) for borrowers to cancel certain credit transactions within 3 business days without penalty. The right of rescission applies primarily to home-secured loans (HELOCs, cash-out refinances) - NOT to standard unsecured personal loans.
Full definition
The right of rescission gives borrowers a 3-business-day window to cancel a loan after signing the credit agreement, without penalty or obligation. This right is codified under Regulation Z of TILA (15 U.S.C. 1635). What the right of rescission covers: Home-secured credit transactions where the borrower's primary residence is the collateral. This includes: HELOCs, home equity loans, cash-out refinances on a primary residence. It does NOT cover: purchase money mortgages (the original mortgage to buy the home), refinances that do not change the amount of the lien, or investment property transactions. What the right of rescission does NOT cover: Unsecured personal loans - no right of rescission under TILA. The right of rescission is specifically for home-secured credit to protect borrowers from losing their homes impulsively. How the 3 days are counted: Business days for rescission purposes include Saturdays but not Sundays or federal public holidays. Day 0 is the day you sign the credit agreement. You have until midnight of the 3rd business day to rescind. If you sign on Friday, the rescission period expires at midnight the following Tuesday (Saturday counts, Sunday does not). How to exercise the right: Send written notice (mail, fax, email if lender permits) to the lender within the 3-day window. The lender must return any money you paid within 20 calendar days of receiving the rescission notice. State law analogs: Some states have additional cooling-off periods or cancellation rights for certain consumer transactions (door-to-door sales, gym memberships, home improvement contracts). These vary by state and are separate from the federal TILA right of rescission.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- June 15, 2026
- TILA (Truth in Lending Act)The federal law that requires lenders to disclose loan terms, APR, fees, and the schedule of payments before a borrower signs.
- FCRA (Fair Credit Reporting Act)The federal law that governs credit reports and credit-bureau practices, including your right to a free annual report and to dispute errors.
- ECOA (Equal Credit Opportunity Act)The federal law that prohibits lender discrimination based on race, religion, sex, marital status, age, national origin, or receipt of public assistance.
- MLA (Military Lending Act)Federal law capping consumer-credit APRs to active-duty service members and their dependents at 36% (the Military APR, or MAPR).
- CFPB (Consumer Financial Protection Bureau)The federal agency that supervises and enforces consumer financial-protection laws across most U.S. lenders.
- TCPA (Telephone Consumer Protection Act)The federal law governing telemarketing calls and texts, including the prior-express-written-consent requirement for autodialed marketing.
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