Sometimes we need to take out loans and we simply can't do it on our good credit alone. When that happens we need something to offer the lender as collateral. If you've put some of your money into a certificate of deposit (CD) you can use this CD as collateral for a loan.
Let's say that you've managed to save $15,000 through a combination of incredibly hard work and strict frugality. This $15,000 is something you can point to with pride, and congratulations are in order. Rather than go on a wild spending spree, you decide 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 then circumstances change, and you need to take out a loan - maybe you've come across an adorable little cottage you want to buy, and need all the help you can get to buy it, but you don't want to part with the CD. The good news is that you can use the CD as collateral for a loan.
Before you try to take out a loan using your CD as collateral, try to remember a few key things. It is best to try to get a loan using your CD as collateral from the bank that issued the CD in the first place. Banks tend to want to use their own CDs as collateral, not another bank's.
Before you try using your CD as collateral for a loan, be sure to consult with a financial advisor. 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.