How a CD-secured loan works
With a CD-secured loan, also called a share-secured loan at a credit union, the bank or credit union holds your CD as security and lends you a share of its balance. The CD stays in place and keeps earning its rate while the loan runs. Some lenders also let you borrow up to the full balance.
The loan rate is usually the CD's rate plus a margin the lender sets, and the loan term is normally tied to the time left on the CD. Because the CD keeps earning, the real extra cost of borrowing is the part of the loan interest above the CD rate. The calculator shows that as well as the total interest.
The limit, the margin and the rates differ between lenders, so you enter them from your offer. The loan rate is treated as a nominal annual rate and interest is the rate divided by 12 each month. A lender's APR may also include fees.
Worked example
A $10,000 CD at 4% a year, with interest added monthly, grows to $10,831.43 over 2 years. If a lender allows 90%, you could borrow up to $9,000.00. Borrowing $9,000 for 12 months at 2 points above the CD rate, which is 6.00% a year, in equal monthly instalments costs $774.60 a month and $295.17 in interest. Of that, $98.39 is above the 4% the CD earns.
A loan of $10,000 over 48 months at 4% a year, which is a CD paying 2% with a 2 point margin, costs $225.79 a month and $837.95 in interest, with the full CD balance used as the limit.
The fixed deposit loan calculator is the global version of this page, in rupees by default.
Things to check
Ask how much of the CD the lender lends, the margin over the CD rate, whether the CD can be withdrawn without penalty while pledged, and what happens to it if you miss payments. Compare the loan with other borrowing before you decide.
For loans secured on property, see the secured loans calculator.
Inputs for the CD secured loan calculator
CD balance
The amount in the certificate of deposit that you would pledge as security.
Rate the CD earns (per year)
The yearly rate on the CD. The rate shown is only an example.
Interest on the deposit is added
How often the CD's interest is added: yearly, half-yearly, quarterly or monthly.
Time left on the CD
The loan cannot run longer than this. Months are fine, for example 2.5 years.
Most the lender lends against it
The share of the CD the lender allows you to borrow. Use the lender's figure.
Points the loan costs above the deposit rate
The loan rate is the CD rate plus this margin. Use the lender's figure.
Loan you want
The amount you want to borrow against the CD.
Loan term
The months you will borrow for, up to the time left on the CD.
Loan is repaid
Interest only with the loan at the end, or in equal monthly instalments.
CALCULATOR QUESTIONS
CD secured loan calculator questions
What is a CD-secured loan?
A loan where the lender holds your certificate of deposit as security. The CD usually keeps earning interest while the loan runs.
How much can I borrow against a CD?
It depends on the lender. Some lend a share of the balance and some the full balance. Enter your lender's figure.
What is the real cost of the loan?
The part of the loan interest above the rate your CD earns, because the CD's own interest continues.
Is the loan rate an APR?
The calculator uses a nominal annual rate divided by 12 each month. A lender's APR may include fees.