Call-off loan and drawdown loan

The call-off loan (drawdown loan) is often also referred to as a framework loan. A call-off loan shares many similarities with, but also some differences from, an overdraft facility. It is not tied to a checking account like an overdraft. It is set up once and is available to the customer at any time either in full or in part. Often the interest rates for a drawdown loan are considerably cheaper than for an overdraft. They are roughly comparable to the interest rates of an installment loan. Unlike an installment loan, however, a call-off loan can be repaid flexibly. Depending on which bank is the provider, conditions such as interest rates, credit limit, repayment, annual interest rate and loan amount may differ.

What is a call-off loan?

A call-off loan is a special form of credit that is usually available to private customers. With a drawdown loan, the customer has a maximum credit line which, unlike an overdraft, must be repaid according to a fixed repayment plan if it is drawn upon. The customer therefore has access to a potential amount but benefits from a fixed repayment amount with calculable risk and costs. Another advantage of the drawdown loan is its temporal flexibility. While other loan types are usually paid out upon approval of the application, the borrower alone decides when to draw on a call-off loan. Further advantages relate to the terms, which are specifically aimed at customers with increased financing needs.

Similar to an overdraft facility, a call-off loan provides a credit limit within which the borrower can move freely. The full volume does not need to be used, but usually access to the loan is allowed only once. A precise calculation of financial needs is therefore one of the top priorities the borrower should consider. Unlike an overdraft, the drawdown loan also does not have a higher or flexible interest rate, which means the borrower can not only calculate their needs but also their costs precisely.

A drawdown loan is usually an unsecured loan. This means that no collateral needs to be presented to draw on it. Thus, borrowers are often spared guarantors or pledging real estate or valuables. However, this does not mean that the usual statutory provisions do not apply. The regulations of German and European law apply. Furthermore, the drawdown loan is flexible in repayment. The borrower is allowed, for example, to pause repayments or to postpone the start of the repayment phase for a longer period. During this time, interest is usually still charged, although many lenders offer special conditions that allow customers to keep costs under control. In addition, interest is charged only on the amount actually borrowed, not on the available credit line. The call-off loan is popular with customers precisely because it allows flexible disbursement. The credit line can be used, but a choice can be made between a partial or full disbursement. In practice, such loan types are often used during a borrower’s training or recovery phase. In most fee models there are no additional costs upon drawing or repaying the loans. Only the obligatory advisory and acceptance fee and, of course, the interest are added. Many banks and credit institutions also offer modalities for favorable and early repayment of the balance. The drawdown loan is not particularly popular within the banking industry because of the reserves that must be formed. By law, these must cover the entire credit line made available and thus hinder providers in their business activities.

Requirements for call-off loans and framework loans

Anyone who has reached the age of 18 and is fully legally competent could theoretically receive a call-off loan. Whether and to what extent such a loan is possible depends on the level of personal creditworthiness and the amount of income. Although a call-off loan is primarily granted to employees or civil servants, there are also loan offers aimed at self-employed persons, freelancers or similar groups. Trainees or students could also receive a call-off loan. However, they must expect that the available loan amount may be lower than for other groups. Those who want to obtain other loans in addition to a call-off loan can theoretically do so. However, they must expect the lender to examine closely whether the income is sufficient to pay the regular loan installments without neglecting everyday financial obligations. There must therefore be enough money each month to cover repayment of the call-off loan or interest charges on your account; otherwise your bank will not approve a call-off loan.

Comparing loans for a call-off loan

Before deciding on a call-off (framework) loan, it is advisable to compare the terms of various banks. It is very important to pay attention to the possible loan amount, the eligibility requirements and the level of the effective annual interest rate. The latter consists, for a framework loan, of the nominal interest rate and any other fees for setup or account maintenance. In principle, the interest rate is variable. This specifically means that it can change constantly during the term of the drawdown loan. Credit institutions use the European Central Bank’s key interest rate or the short-term capital market rate EURIBOR as a basis. Even if the drawdown loan is offered by numerous branch or direct banks, this does not mean that every German or foreign bank provides such a loan. Once a suitable call-off loan has been found, it can be applied for immediately. This can be done either at a local bank branch or online. Comparing providers and specific conditions such as credit limit, interest rate, repayment etc. is worthwhile in any case.

Call-off loan compared to an overdraft

Not only compared to an overdraft, but also compared to an installment loan, a call-off loan offers a number of advantages. Interest rates are significantly cheaper than for an overdraft and are often even in the single digits. In addition, the call-off (framework) loan is not tied to a checking account. If the call-off loan is drawn on in full or in part, however, the borrower must expect to pay a certain minimum repayment rate each month, which is not the case with an overdraft. The level of this minimum repayment rate is set by the respective lender or credit institution. It is usually 2 percent of the current debit balance on the account associated with the call-off loan. For some lenders it is sufficient if the customer pays the monthly interest due. The principal could then be repaid at a later date. Once set up, the call-off loan is generally available to the customer at will. For this reason it is a good option for making urgently needed expenditures or fulfilling certain consumer wishes.

Call-off loan compared to an installment loan

With an installment loan, the entire loan amount is paid out immediately after approval and must then be repaid in equal monthly installments. This reduces the remaining balance continuously until it is fully repaid at the end of the term. A call-off loan also provides a certain loan amount. However, it is only disbursed if the customer explicitly requests it and has the amount transferred in full or in part to their checking account. The exact process will be explained to the borrower by the bank that grants the call-off loan after the application and approval. If a call-off loan is to be taken out in addition to an installment loan, the conditions must be met. Whether your bank agrees to an additional loan and how high the credit limit of the call-off loan will be depends entirely on the provider.

The call-off (framework) loan is also very suitable for replacing other loans or for refinancing older, often less favorable installment loans. However, it is a condition that the remaining outstanding loan amount is not higher than the available limit of the call-off loan. Otherwise refinancing usually makes little sense. Also, when replacing a loan, you should always check whether the lender may charge a prepayment penalty. If this is the case, it could happen that the cost of the prepayment penalty cancels out the interest savings. If you have the chance to get a call-off loan in addition to an existing installment and/or overdraft loan, you should definitely take advantage of it. However, it is not advisable to constantly use the call-off loan up to its limit. If something unexpected happens over time, it could quickly lead to the borrower getting into financial difficulties. Anyone who, for whatever reason, cannot meet the monthly minimum repayment for a call-off loan should contact their lender as soon as possible to discuss alternatives and avoid serious consequences such as a loan termination. In that case the borrower would be forced to repay the entire loan amount immediately. In addition, a loan termination, whether it is a call-off loan, an overdraft or an installment loan, always leads to a corresponding negative entry with Schufa. Such a Schufa entry means that the customer cannot obtain a loan from a German credit institution until the cause of the negative entry has been remedied. Under certain conditions, however, there is the option of turning to a private credit broker or a foreign lender and applying there for a loan without Schufa.

Our conclusion on the call-off loan - consumer-friendly and popular

The call-off loan is extremely popular with customers because of its favorable conditions. Especially for projects with uncertain financing needs, this form of credit is the ideal solution, as a fixed upper limit is set while the actual need remains freely selectable. The limited supply within Germany is due to restrictive legal conditions, but here there is demand-oriented coverage for social and essential needs provided by state and semi-state providers, as well as by private and commercial ones. Those interested in a drawdown loan should therefore compare the different offers and plan accordingly in order to estimate the maximum required credit line roughly. Due to the lack of collateral, a rough calculation of the maximum financing gap is very important, as most lenders are primarily interested in this aspect. Those who do not find what they are looking for in Germany can well consider a foreign provider. It is important for borrowers that the contract is concluded within the territory of the EU so that both parties are subject to European law and the associated consumer protections. Furthermore, borrowers should always plan for the possibility of repayment problems and secure themselves accordingly to fully protect their rights.

Call-off loan

A call-off loan shares many similarities with, but also some differences from, an overdraft facility. It is not tied to a checking account, is set up once and is available to the customer at any time either in full or in part. Often the interest rates for a call-off loan are considerably cheaper than for an overdraft. They are roughly comparable to the interest rates of an installment loan. Unlike an installment loan, however, a call-off loan can be repaid flexibly.

Loan comparison recommended

Before deciding on a call-off loan, it is advisable to compare the terms of various banks. It is very important to pay attention to the possible loan amounts, the eligibility requirements and the level of the effective annual interest rate. The latter consists of the nominal interest rate and any other fees for setup or account maintenance. In principle, the interest rate is variable. This specifically means that it can change constantly during the term of the call-off loan. Credit institutions use the European Central Bank’s key interest rate or the short-term capital market rate EURIBOR as a basis. Even if the call-off loan is offered by numerous branch or direct banks, this does not mean that every German or foreign bank provides such a loan. Once a suitable call-off loan has been found, it can be applied for immediately. This can be done either at a local bank branch or online.

Requirements for a call-off loan

Anyone who has reached the age of 18 and is fully legally competent could theoretically receive a call-off loan. Whether and to what extent this is actually possible depends on the level of personal creditworthiness and the amount of income. Although a call-off loan is primarily granted to employees or civil servants, there are also loan offers aimed at self-employed persons, freelancers or similar groups. Trainees or students could also receive a call-off loan. However, they must expect that the available loan amount may be lower than for other groups. Those who want to obtain other loans in addition to a call-off loan can theoretically do so. However, they must expect the lender to examine closely whether the income is sufficient to pay the regular loan installments without neglecting everyday financial obligations.

Call-off loan and overdraft

Not only compared to an overdraft, but also compared to an installment loan, a call-off loan offers a number of advantages. Interest rates are significantly cheaper than for an overdraft and are often even in the single digits. If the call-off loan is drawn on in full or in part, the borrower must expect to pay a certain minimum repayment rate each month, which is not the case with an overdraft. The level of this minimum repayment rate is set by the lender. It is usually 2 percent of the current debit balance on the account associated with the call-off loan. For some lenders it is sufficient if the customer pays the monthly interest due. The principal could then be repaid at a later date. Once set up, the call-off loan is generally available to the customer at will. For this reason it is a good option for making urgently needed expenditures or fulfilling certain consumer wishes.

Call-off loan and installment loan

An installment loan is the most commonly requested form of consumer credit. It can be available to the customer for general use or explicitly tied to a purpose. The latter would be the case, for example, with a mortgage loan but also with a car loan. The decision whether to take out an installment loan or to prefer a call-off loan is often not easy. For this reason, it is advisable to weigh the advantages and disadvantages of the different loan types carefully. With an installment loan, the entire loan amount is paid out immediately after approval and must then be repaid in equal monthly installments. This reduces the remaining balance continuously until it is fully repaid at the end of the term. A call-off loan also provides a certain loan amount. However, it is only disbursed if the customer explicitly requests it and has the amount transferred in full or in part to their checking account. The exact process will be explained to the borrower by the bank that grants the call-off loan after the application and approval. If a call-off loan is to be taken out in addition to an installment loan, the conditions must be met. It is also very suitable for replacing other loans or refinancing older, often less favorable installment loans. However, it is a condition that the remaining outstanding loan amount is not higher than the available limit of the call-off loan. Otherwise refinancing usually makes little sense. Also, when replacing a loan, you should always check whether the respective lender may charge a prepayment penalty. If this is the case, it could happen that the prepayment penalty cancels out the interest savings that a new loan would bring. If you have the chance to get a call-off loan in addition to an existing installment and/or overdraft loan, you should definitely take advantage of it. However, it is not advisable to constantly use the call-off loan up to its limit. If something unexpected happens over time, it could quickly lead to the borrower getting into financial difficulties. Anyone who, for whatever reason, cannot meet the monthly minimum repayment for a call-off loan should contact their lender as soon as possible to discuss alternatives and avoid serious consequences such as a loan termination. In that case the borrower would be forced to repay the entire loan amount immediately. In addition, a loan termination, whether it is a call-off loan, an overdraft or an installment loan, always leads to a corresponding negative entry with Schufa with the result that the customer cannot obtain a loan from a German credit institution until the cause of the negative entry has been remedied. Under certain conditions, however, there is the option of turning to a private credit broker or a foreign lender and applying there for a loan without Schufa.