Sometimes taking out a loan can’t be accomplished on our good credit alone. When that happens we need something to offer the lender as collateral. If you happen to have invested into a certificate of deposit (CD) you can use it as collateral for a loan.
CD as collateral:
Let’s say you’ve saved up $15,000 and decided to put the money into a certificate of deposit where it will earn a healthy amount of interest. You know, as you put your money into this CD, that you won’t be allowed to access it until it matures five years from the day you buy it. But what if somewhere down the road, circumstances change, and you need to take out a loan? You don’t want to part with the CD, as you will will be dealt CD withdrawal penalties . The good news is that you can use the CD as collateral for a loan. This way, you can have access to the $15,000 you need, based on the investment you already have.
Before you try to take out a loan using your CD as collateral, try to remember a few things:
- It is best to try to get a loan using your CD as collateral from the same bank that issued the CD in the first place. Banks tend to prefer keeping complicated transactions like these consolidated to one bank, so make sure you take out the loan with the same bank your CD is with.
- Before you try using your CD as collateral for a loan, be sure to consult with a financial advisor. These transactions are complicated, and he or she will explain to you the pros and cons of using your CD as collateral for a loan, and whether it’s the right thing for you to do.
My father took out collateral on a cd at his bank to help me get a van. He’s possibly going into a nursing home now. Is there a way to change that and make sure it’s in my name? If left alone will I lose my van when this happens?