Call Provision

A provision on a bond or other fixed-income instrument that allows the original issuer to repurchase and retire the bonds. If there is a call provision in place, it will typically come with a time window under which the bond can be called, and a specific price to be paid to bondholders and any accrued interest are defined.

Callable bonds will pay a higher yield than comparable non-callable bonds.

Investopedia Says:
A bond call will almost always favor the issuer over the investor; if it doesn't, the issuer will simply continue to make the current interest payments and keep the debt active. Typically, call options on bonds will be exercised by the issuer when interest rates have fallen. The reason for this is that the issuer can simply issue new debt at a lower rate of interest, effectively reducing the overall cost of their borrowing, instead of continuing to pay the higher effective rate on the borrowings.

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Clause in a bond's Indenture that allows the issuer to redeem the bond before maturity. The call provision will spell out the first Call Date and whether the bond will be called at Par or at a slight premium to par. Some preferred stock issues also have call provisions spelling out the conditions of a redemption. See also Provisional Call Feature.

Clauses in a loan that give the lender the right to accelerate the debt upon the occurrence of a specific event or date. See Acceleration Clause.Example: Abel, the Mortgage lender, notices that Baker, the homeowner, has begun to demolish the property. Call provisions in the loan allow Abel to claim that the full debt is now due.