For unpredictable expenses, which usually still happen at the end of the month when the account is already cleared, many consumers use the expensive overdraft facility (often with double-digit interest rates). An installment loan is also possible for larger sums and investments.
A good alternative for this, which most customers are not aware of, is the so-called on-demand loan or credit line. It is a niche product that is not often offered – partly because the banks earn less from it.
With the call loan, the customer gets the best of two worlds: the flexibility of the overdraft facility and the low interest rate on an installment loan.
The procedure looks like this:
First, a credit account must be opened at a bank. Money can then be called up from this account up to a maximum amount (usually between 10,000 and 50,000 USD). Some banks offer the call credit from as little as one USD. Partial sums or the entire amount can be used at once.
The credit line is of course based on the creditworthiness and monthly income. Some credit institutions also offer on-demand loans to freelancers, traders and the self-employed.
The repayment is then made in small monthly installments or through irregular repayments. The entire amount can also be repaid in one go without having to accept prepayment penalties as with the installment loan.
Another advantage of the call credit is the comparatively low interest rate, which in the best case is around 6 percent at the installment loan level. The interest rate is variable and can change monthly.
Comparison of call credits
As with all other loans, a detailed comparison of the offers should be made before taking up. In addition to the maximum loan amount and, of course, the amount of interest, the call credits can also differ in terms of repayment. You should also make sure that interest only accrues on the amount actually used and not on the maximum amount. Some banks also accept that repayment can be paused or started later.
This form of credit is offered by a number of branch banks, but also by direct banks. The savings banks, for example, require a current account in their own house – this is not the case with most direct and private banks.
The annual percentage rate should be used as a comparison value between the offers and any installment loans.
When comparing, you should also note any processing fees or disposal fees. These can eat up the interest advantages again. Therefore, calculate the costs of the providers against each other for your concrete expected situation before you decide on the best call credit for yourself.
The call credit is – as tempting as it sounds – of course not free money, but must be repaid sooner or later. The corresponding consumer discipline is also required here. Since the call credit is in a separate account, it is not – or only to a small extent – automatically repaid. For interest-rate repayments, the borrower must actively approach the bank and make special repayments. Even if interest rates are raised, it is up to the consumer to adjust the monthly repayment if necessary. However, this should be as high as possible so that you can repay the borrowed money quickly, keep interest rates low and the loan does not accustom you to a higher standard of living.