What is a credit line (call credit)?
With the credit line, the bank gives you a loan within a certain credit line. This is often between $ 2,500 and $ 20,000. In contrast to the installment loan, the bank does not automatically pay the loan to you, but you yourself determine when and how much of the loan amount you want to call. Hence the name on-demand credit. You only ever pay interest on the amount actually borrowed.
The credit line is thus positioned between installment loan and overdraft facility: with the overdraft facility, the loan shares the option of flexible repayment. You can also use it to borrow lower sums. Unlike the overdraft facility, the credit facility does not depend on the current account, but can be taken out like an installment loan from a foreign bank. The interest rate for the credit line is also pretty much between expensive overdraft rates (currently 9.72% on average, as of September 2018) and low lending rates (from 0.69%, as of May 2019).
Our tip: You usually don’t get a credit line right away. Depending on the provider, the grant can take some time. The conclusion of a framework credit agreement is therefore particularly worthwhile if you do not already need it acutely!
Framework credit, installment credit or overdraft facility: what are the differences?
The following table is intended to give you an overview of the most important types of bank credit and to highlight the main differences between credit lines, installment loans and overdrafts.
Table: How the credit line, installment loan and overdraft facility differ
|Credit line||Installment loan||Overdraft facility|
|Which bank||free||free||checking account|
|Minimum loan amount||flexible||often only from $ 1,000||no|
|Loan interest||variable||fixed, from 1%||fixed, from approx. 10%|
|repayment||flexible||fixed rates / term||flexible|
The table shows that an installment loan is the cheapest form of financing and overdraft is the most expensive. In between is the framework loan, which can always be the right alternative if you only need a smaller amount and want to remain flexible with the loan, especially when it comes to repayment.
How high is the interest rate on the credit line?
The amount of the loan interest is variable with the credit line. That means: The bank can theoretically change the interest rate at any time. The decisive factor here is, for example, the reference interest rate of the Cream Bank. As a rule, the interest rate on the credit line will always remain cheaper than that of your overdraft facility. In addition, banks must notify them of an interest rate hike in advance.
Banks give very different conditions for framework credit agreements. There are those that start with low interest rates and become more expensive after a few months. Others keep their interest rates constant.
Do I have other costs with a credit line?
As a rule, you do not incur any further costs with the call credit. Neither account maintenance fees nor transaction fees should apply. The reason for these favorable conditions is that it is often direct banks that offer credit lines. They want to win new customers along the way, who will embrace them accordingly. You can use that.
How do I pay back a credit line?
The different providers of credit lines also handle the repayment modalities differently. Some agree monthly minimum rates, others do not. In this case, taking out a credit line requires a particularly high degree of self-discipline when it comes to repaying debt.
The advantage of the credit line, however, is that this loan usually gives you maximum flexibility in repayment. Unlike with the installment loan, you do not have to pay prepayment penalty in the case of on-demand loans in the event of special repayments or early total repayments. You can usually easily transfer borrowed amounts back to your credit account at any time.
How and where can I get a credit line that suits me?
Before deciding on a credit line, you should compare different providers. The conditions fluctuate considerably and not every bank openly advertises this form of loan. It is therefore worth asking! You should make sure that you can book the loan amount directly to your checking account and that the interest rate is below the average overdraft rate of currently 9.78%.
Once you have chosen a provider, you can often apply for the on-demand credit directly online. The following requirements must be met:
- Legal age
- Residence and workplace in Germany
- Proof of identity (e.g. post or video ident)
- regular income (proof by pay slips or tax assessments)
- positive Credit Bureau information
- Current account with a Lite bank
After you have applied for the credit line, the bank checks your credit rating and obtains Credit Bureau information. With positive feedback, there is nothing standing in the way of the loan. However, the process before the loan is granted varies from bank to bank.
You need to know: Banks always report the granting of a credit line to Credit Bureau! Keep this in mind if you plan to borrow more that could be at risk.
Framework credit or installment loan – which is better?
The great advantages of the credit line – flexible repayment and low minimum loan amount – can often be found with installment loans with a little research. The advantage then: installment loans offer the lower interest rates!
There are installment loans that grant special repayment or total repayment rights and even the possibility of payment breaks. Before you decide on a credit line, we therefore recommend that you check carefully whether you are even better off with an installment loan.
You can get an overview of the cheapest market offers with our installment loan comparison.