We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Call Loan?

Mary McMahon
Updated: Jan 24, 2024

A call loan is a type of loan which is repayable on demand, rather than being repaid on a fixed schedule. Call loans are most commonly seen in brokerage houses, although they can appear in other contexts as well. While they can be a flexible and powerful tool for funding various endeavors, they can also be very dangerous, because the borrower is exposed to the risk of having the loan “called,” meaning that the lender demands the payment in full at any time.

One classic use of the call loan is in margin trading. When people establish an account with a stockbroker, they can set up a margin account, which allows them to borrow money from the broker for the purpose of buying stocks, a practice known as trading on the margin. The money is loaned in the form of a call loan so that the broker can call the loan if the value of the stock falls abruptly, ensuring that the broker gets its money back.

In the case of margin trading, if the customer is unable to repay the loan when requested, the broker can liquidate some of the borrower's stock to repay the loan. While trading on the margin can potentially generate a substantial profit by allowing people to work with more money than they have to take advantage of good trends in the stock market, it can also expose them to substantial losses. Since the broker can sell stock without asking if a customer fails to repay the call loan when requested, a customer could easily lose everything by trading on the margin if stock values fall precipitously.

Banks also work with call loans, issuing call loans to other banks as needed to increase liquidity. Bank A might, for example, take out a call loan from Bank B to ensure that it can cover the payroll checks which it knows will be coming in. Many banks issue call loans for 24 hours and sometimes even less, moving huge sums of money around in the process. Some cash advance and “payday” loans are also call loans, occasionally with a usurious rate of interest and terms which are very unfavorable to borrowers.

Usually, when a lender decides to call a loan, it gives the borrower some warning. Brokerage houses, for example, will call clients in the morning to inform them that their loans will be called, so that they have a chance to organize funds to cover the loan. A call loan may go for days, weeks, or even months without being called if the lender feels comfortable, since interest will be racking up all the while, but borrowers should not depend on prolonged inaction when it comes to a call loan.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.