Loftus-Cheek has impressed during his time at Selhurst Park, scoring his first goal for the Eagles and second ever in the Premier League on Saturday in a 2-1 win against Stoke.
Hodgson said: “I have a feeling that they have the right to call him back if he is not playing enough games or featuring in enough games, which is a good clause.
“If you are loaning out players who you believe in to get playing time, and the clubs aren’t using the player, then I think you are entitled to bring them back.
“I think that clause exists. That is, I suppose, a risk for us. If we suddenly decide we don’t want to use him then he could go back.”
With the Eagles struggling at the bottom of the table Hodgson acknowledged the threat of losing a highly-rated talent, but doesn’t see his playing time being an issue.
He added: “We are enjoying having him with us and using him in our team, so I don’t think I have to fear that at this moment in time.”