What is a CD Loan?
When most people think of a CD loan, they imagine borrowing a reasonable amount of money over a period of time. They may also be thinking that they would not lose their money overnight. However, all of these are not actually true.
A CD loan is just a short-term high-interest loan from a bank that can be split into a fixed term and an adjustable-rate plan. With a 15-year plan, for example, you would make monthly payments for the term – i.e., Certificate of Deposit (CDs) in one month, a year, a month, and a day, etc. Most plans require a minimum CD balance established.
The most common scenario for a CD loan is that you are given a total of $10,000, which is the minimum amount that is held in CDs. After you make your monthly payments for the term or agreed period, you want to request an ending balance to know what the minimum amount of the new Certificate of Deposit is. An option could be in the form of a lump sum, a one-time payment, or a series of payments spread over the term.
The term could be short; a year, a six-month span, or could last for as long as five years. The interest would be compounded monthly and set up on a monthly basis. An important point to make is that if you make a payment, it is subject to being taxable and if you borrow enough, and over a long enough period, then it may pay off many times. This is one way how banks can make a lot of money with a Certificate of Deposit or Certificate of Line of Credit.
You want to make sure you are not borrowing more than your total savings in your CD account because your interest could go up significantly that way. And, as with all short-term high-interest accounts, you would want to see a Fund Manager with the expertise and knowledge to help you manage your funds. However, if you successfully manage your funds, then it could build your personal wealth.
There is a variety of terms to research if you want to find out what the best CD rates are in the market. Check out some of the websites and make a list of what the providers have to offer. A little research could go a long way.
Larger banks might be able to offer higher CD rates, but then again, they may want to place your funds in high-earning market accounts. Some of them are offering 0% APY for up to twelve months and then suddenly are asking for higher CD rates on an increasing frequency. So, if you have that bank on your list, go do your research, but also keep an eye out for something else. There may be another bank that you want to focus on.
You want to take a look at the three major players in the banking world – highlighting the most notable differences, both in size and also as well as the exemption or other perks they offer that you might not know about.
Citiccount Bank – This bank has a solid reputation that dates back nearly two decades. One thing they are known for is their excellent online banking capabilities, and this quality has definitely rubbed off on their branch locations. They have locations available in both DB locationsandCorporate locations(aka – ATM only). Although they are not famous for excellent interest rates, you could consolidate your CD’s and other money with them and enjoy a much higher interest rate when compared to their competitors. Last I checked, they are still among the highest paying banks on a per capita fee scale.
