Yusra3
VIP Contributor
A CD loan, also known as a certificate of deposit loan, is a type of secured loan where you use a certificate of deposit (CD) account as collateral. The CD serves as security for the loan, lowering the lender's risk.
With a CD loan, you borrow against the value of an existing CD or simultaneously open a new CD funded by the loan proceeds. The lender keeps the CD as collateral until the loan is fully repaid.
Because CD loans are secured by the CD's principal and interest, they typically offer lower interest rates than unsecured personal loans. Borrowers with less-than-ideal credit may find approval easier by putting up CD collateral.
However, if you default on the CD loan payments, the bank has the right to claim your CD funds to satisfy the debt - so there is risk of losing that money if unable to repay.
CD loans make the most sense when needing access to funds for a short period and having enough in a CD to back the loan amount. They provide affordable secured financing without disrupting long-term investment strategies.
With a CD loan, you borrow against the value of an existing CD or simultaneously open a new CD funded by the loan proceeds. The lender keeps the CD as collateral until the loan is fully repaid.
Because CD loans are secured by the CD's principal and interest, they typically offer lower interest rates than unsecured personal loans. Borrowers with less-than-ideal credit may find approval easier by putting up CD collateral.
However, if you default on the CD loan payments, the bank has the right to claim your CD funds to satisfy the debt - so there is risk of losing that money if unable to repay.
CD loans make the most sense when needing access to funds for a short period and having enough in a CD to back the loan amount. They provide affordable secured financing without disrupting long-term investment strategies.
