An on-demand loan works just as flexibly as an overdraft facility. A rigid repayment is not intended for this type of loan. Instead, the bank grants the customer up to a defined credit limit that he can freely use. For this reason, the call credit is also called a framework credit.
In contrast to the overdraft facility, the call credit is not linked to a checking account. The financial institution sets up a separate credit account for the borrower, from which he can access money at any time. The borrower can then transfer the outstanding amount from an account of his choice to the credit account to repay the loan. The overdraft facility, on the other hand, only allows an existing account to be overdrawn.
The credit line is freely negotiable and depends primarily on the creditworthiness of the customer. After receiving a Schufa report, the bank sets a maximum loan amount. The available credit lines range from 300 to 50,000 USD. In practice, however, minimum limits of 2,500 USD are common. The banks have an interest in setting the credit limit for the call credit as high as possible in order to earn on the interest. However, the borrower is not forced to fully utilize the loan. In addition, he only pays interest for the loan amount actually drawn.
Since the call credit is not limited in time, the banks reserve the right to adjust the interest rate to current market conditions. Some credit institutions base the borrowing rate on the key interest rate of the Cream bank. Others link the interest rate to the Euribor money market rate, which reflects short-term interest rate developments on the capital markets.
As a rule, the call credits offer somewhat better conditions than the conventional overdraft loans with regard to the interest rate. As a result, this type of loan is often a cheaper alternative to overdraft facilities. However, call credits are less well known in the public eye. This may be because only a small percentage of banks offer this type of loan.