Some banks and credit institutions offer on-demand or framework loans a special loan offer for private customers, which is cheaper than the overdraft facility and more flexible than the installment loan.
What is an on-demand loan?
Money on demand and on demand – The demand credit is characterized by its high flexibility with regard to dispositions and repayment options. It is not necessarily tied to terms or to a specific purpose. The credit line is between 1,000 and 50,000 USD. The amount of the loan depends on the creditworthiness and the income of the borrower. The borrower is free to choose whether to use the entire amount at once or to debit only partial amounts. Interest is always charged on the credit line only for the amount actually used. If the borrower leaves the loan amount untouched, no interest accrues.
The borrowing rate is variable, but can be fixed for a certain time depending on the offer. When determining the borrowing rate for the credit line, some banks also orientate themselves on the customer’s creditworthiness. The higher it is, the lower the borrowing rate. In practice, the repayment of the call credit is flexible. It includes a monthly minimum rate, which is either measured as a percentage of the credit line or the loan amount actually dispensed, or is defined by a minimum amount, for example 50 USD. In addition, free special payments or the repayment of the amount dispensed are possible at once. The framework credit can be terminated by timely cancellation after the account has been cleared. Our call credit comparison is worthwhile to find the framework loan that offers the best conditions.
Due to the repayments, the call credit keeps increasing and thus offers a cash reserve that can be used as needed. However, the credit line is not designed for infinity, because here too there is a risk of over-indebtedness. Those who only pay back the minimum standard rate have a high cost when debiting their monthly interest if they exhaust the credit again and again to the limit. A calculation example: Mr. X borrows 5,000 USD, pays a minimum of 50 USD per month and, according to an amount of 4,500 USD, 20 USD per month is added. If he moves permanently in the range of -4,500 USD through regular use of the loan, he pays back 70 USD per month and maybe over years. All in all, that’s 840 USD in costs for the loan. In such a case, the installment loan is the far cheaper alternative.
A call credit is generally only granted to adults. Creditworthiness and collateral are further aspects of the credit line that decide whether to approve the loan application.
The overdraft facility as call credit
If there is insufficient credit in the checking account to cover the expenses, the overdraft facility will help. Today, many consumers automatically set up overdraft facilities when they open a checking account. The overdraft facility is linked to the checking account, ie it is applied for at the bank where the checking account is also held. The credit line for the overdraft facility is based on the income that goes into the checking account and is determined by the bank. It is often twice the monthly incoming payments or monthly income. The higher the income, the higher the overdraft facility or vice versa. In general, however, it is not designed for large amounts, unlike the credit line, where the credit line can be up to $ 50,000. The debit interest for the overdraft loan is also significantly higher than that of the call credit, which is why a credit line can also be an option to redeem an overdraft current account, especially if the customer is permanently in the red. In addition to the interest on the overdraft facility, the interest on the tolerated overdraft, which is extremely high and can amount to almost double the overdraft interest rate, must also be taken into account. A tolerated overdraft is said to exist when dispositions are made beyond the credit line.
In our call credit comparison you will find, among other things, credit lines facilities that are offered independently of a checking account as an independent call credit.
On-demand credit from branch banks or direct banks?
Direct banks work less costly than branch banks, which is why the conditions for an on-demand loan are often much better for the potential borrower. When lending, the personal trust relationship with the branch bank can sometimes be helpful, because accounts are usually already kept here and the income relationships are known.
Maturities in the framework loan yes or no?
The majority of on-demand loan offers are not tied to a term. Some banks, on the other hand, set the term for the credit line according to the creditworthiness and collateral of the borrower, whereby they specify a term range in the offer. Now which is better? Call credit with or without a term? Framework-oriented framework loans require significantly more discipline when repaying than call-off loans with an unlimited term, because when the term ends, the loan amount must also be repaid in full. Without a term, the credit line can practically be exhausted again and again, and of course it also represents a debt trap.
Amount of the loan amount
The possible loan amount is ultimately determined by the bank. Generally, with a call credit, loan amounts of 1,000 to 50,000 USD are available that serve different requirements. When choosing an offer, the first thing that matters is how high the personal credit line is calculated. If, for example, you would like to apply for a credit line in the amount of 10,000 USD, the first thing to do in the framework loan comparison is to probe the offers that actually offer such a credit line.
Framework loans for everyone?
When we talk about overdraft facility, the answer is relatively clear, because it is practically standard and is also given to trainees or students who have reached the age of 18 and have the appropriate creditworthiness or security. The special credit lines offered by banks and credit institutions are primarily aimed at employees who are in permanent employment, and on-demand loans are also available for pensioners, the self-employed, freelancers, civil servants and employees in the public sector, who can show up at special rates. In contrast to installment loans, a credit line is not tied to terms, but should be repaid quickly and should not be used again and again over a period of years.
The interest rate for the credit line – what to look for
The interest rate for the credit line is basically variable and not fixed as with the installment loan. This means that it is subject to interest rate developments and can be adjusted up or down at any time. A few banks and credit institutions offer an interest rate guarantee for a certain period, which can last from a few months to several years. The interest is then fixed for this time.
If you carry out the framework credit comparison, you will find both the debit interest rate tied pa and the annual percentage rate when you enter the interest rate. The borrowing rate is the actual interest you pay for the loan, while the annual percentage rate includes the borrowing rate plus borrowing costs. The effective annual interest rate must therefore be used for a profound comparison of the offers. Extra costs are to be considered separately, which are usually marked as such in the offer, such as account management fees or costs for special payments.
Depending on the offer, the interest rate for the credit line depends on the borrower’s credit rating. You can recognize this from the fact that it says, for example: “Effective interest from …”
Otherwise, only the value of the effective interest or debit interest pa is specified.
The level of the interest rate varies from bank to bank. Some banks offer the credit line at a discounted interest rate for a certain period of time, but this does not necessarily have to be an advantage in the long term. Use a call credit comparison to check which offer actually promises you the best conditions, taking into account all the premises, including the repayment period and interest costs. Here is an example: If the variable interest rate is 4.65% for 12 months and increases to approx. 7.00% from the 13th month, this call credit is particularly interesting if you can repay the loan amount used within a year ,
Repayment options credit line
There is talk of flexible repayment options for on-demand loans. But what does that mean exactly? The borrower can not repay this loan at will, the banks set a monthly minimum amount that is between 1 and 3% of the loan amount. However, there is flexibility with regard to special payments and also the repayment of the amount used in one amount is possible and this is usually free of charge for many offers. It is precisely this point that distinguishes the framework loan from the installment loan.
Pay attention to extra costs!
Special payments of any amount and repayment in one amount should always be possible with the call credit without cost calculation. Account maintenance fees are also to be observed, which the borrower would also like to forego. Processing fees also have a negative impact on the loan. In our call credit comparison you will only find offers that do not include any processing fees.
An on-demand loan also wants to be paid off, but what if an unforeseen shortage arises, the borrower slips into unemployment or dies? Many banks and credit institutions offer additional insurance to cover this risk. For example, residual credit insurance or life insurance is an option, especially for professional groups such as soldiers. If you are interested, check offers from independent insurance providers at the same time, because you do not necessarily have to take out such insurance with the bank that issues the credit line.
New customer offers – keep an eye on the comparison!
Some framework credit offers advertise with the new customer bonus, which can be very different. Discounted interest or an interest reimbursement can be mentioned here as examples. Compare such offers with credit lines without new customer extras in terms of actual efficiency and total costs. The offer can only be considered if you receive an advantage without conditions that does not cause any further costs in the long term.
Cancel credit line
The framework credit can be terminated by the cancellation once the loan amount has been repaid. Notice periods must be observed, which vary in duration depending on the bank. For credit lines with a term, the loan usually ends automatically at the end of the term, then the credit account must also be balanced.