Is Certificate Of Deposit Loan Good Option When need cash?

Certificate Of Deposit Loan

What’s a Certificate of Deposit Loan?

If you have opened a CD at a financial institution and are in need of cash, instead of paying the early-withdrawal fee (some banks charge up to six months of interest), a very good option might be to get yourself a certificate of deposit loan. A certificate of deposit loan is a secured loan where the owner of the certificate of deposit account is allowed to avail a loan based on the existing CD as collateral.

What Are Certificates of Deposit?

Certificates of deposit (also known as CDs) are one of the best ways to save money and make fast and easy cash a decent profit from interest income. Stashing a few certificates of deposit in your portfolio is also a good way of investing cash, as long as you hold them to maturity. A certificate of deposit is a special type of account that usually offers a higher interest rate than a regular savings account. Investing in a CD means locking in your savings for a set amount of time, usually three months to five years, and in this time span, you’re paid interest based on the terms you agreed on when you opened the account. Like savings and checking accounts, CD’s are protected by federal deposit insurance up $250,000, and are thus pretty safe investments.

Why Get a Certificate of Deposit Loan?

The main problem, though, with a CD is that for the duration of the contract, your money is locked and you can’t get access to it. Savings accounts pay less interest, but your money is available to you anytime you need it. In the case of a CD, if you draw your funds early, you pay a penalty, known as an early-withdrawal fee. If you got your CD from a broker, he may have told you that there is no early-withdrawal penalty. That doesn’t necessarily mean, though, that you can’t lose money by trying to cash the CD early.

Here’s how: if you buy a CD through a brokerage firm and cash it before it matures, the broker may try and sell the CD to another investor. You can benefit from this only if interest rates are lower when you cash your CD than they were when you bought it. It is so because an investor will be willing to pay more for your CD if the interest it pays is higher than what the market is offering. If you have a three-year CD at 5.5-percent interest and you want to sell at a time when the highest rate on a three-year CD is 4 percent, you’ll get a premium for your CD. But if you’re strapped for cash and have to sell when the current best rate on a three-year is 6 percent, there’s less demand for your CD and you may have to sell it at a discount. The money you lose could be actually greater than the early-withdrawal penalty you’d pay if you had purchased the CD through a bank. You could even lose an amount equal to your original deposit. That’s where a certificate of deposit loan might come in handy.

How a Certificate of Deposit Loan Works

As previously mentioned, a good way to avoid paying early-withdrawal fees is to get a certificate of deposit loan. As its name suggests, a certificate of deposit loan is a loan that is granted to you with your certificate of deposit as collateral. If you had opened up a CD and find yourself in a situation that would require you to cash it out, remember that you still have options. Instead of paying the early-withdrawal penalty, consider borrowing against those funds instead by getting a certificate of deposit loan. You can borrow the money you need at low rates while the savings that you previously set aside will continue to grow. Depending on the financial institution and your credit history, you can get terms up to 60 months and borrow up to 100% of the CD’s face value. For a fixed dollar amount and a specified time period, a certificate of deposit loan may be arranged for nearly any project or purpose and you’ll continue to earn interest on your account while you’re enjoying the benefits of your new loan.

So whether you’re planning on taking a vacation but don’t want to drive up your credit card balance, want to consolidate some of your bills without paying high interest rates, or have to face urgent and unforeseen expenses, you can get a fixed rate and term certificate of deposit loan.

Whay on which Universities And Credit Card Companies Make Money on Students

How can an educational institute act in its students' best interest if it stands to make fast money off of increasing their debt load? The symbiotic relationship between universities and credit card companies is being questioned more than ever by student groups and politicians, writes the New York Times.
Universities say the contracts bring in badly needed funds, although the example in the article—$8.4 million over 7 years to Michigan State in exchange for students' names and addresses—seems hardly worth it once you consider the long term damage done to unprepared students who enmesh themselves in debt, or the black mark against Michigan State now that the public knows that it sold off student contact info.
Banks say they cap credit cards at $2,500, but that's hardly a "low" credit limit for what are essentially unemployed or part-time employeed customers. The Times cites a US PIRG survey that found graduating "seniors with balances had an average debt of $2,623 on their cards."
A spokesman for Michigan State gives the paper an unintentionally telling quote about their concern for students:

“It provides money for scholarships and other programs,” said Terry R. Livermore, manager of licensing programs at Michigan State. He said that the program was aimed primarily at alumni and the university would not include sharing student information in future credit card contracts. “The students are such a minuscule portion of this program.”

But of course none of this would matter if students knew better than to exchange their future financial independence for items as trivial as a tshirt, mug, or blanket. Yes, blanket:

Abigail D. Molina, a second-year law student at the University of Oregon, applied in 2007 for a Chase Visa offered at a tent outside a football game. In exchange, she received a blanket. “I mostly wanted the blanket,” Ms. Molina said.

Please, do not be like Ms. Molina (or like me—I made the same stupid choices in college). Meg's "10 Commandments of Credit" is a good place to start for advice on how to approach credit cards and consumer debt.

Tuesday's Personal Finance stories

Don't miss these top stories:

financial planner

You can skimp on the air conditioning in the summer, using fans or shade or cool drinks to keep your home and yourself comfortable. But you don't have much choice about the heat: Sweaters and blankets only go so far when temperatures get below freezing.

So it is with much more trepidation that homeowners look to the winter season, dreading the day when the furnace comes on and the utility bills jumps up. And this year there is more reason to fret than ever: Already beset with rising food costs and near-record prices at the gasoline pump, home-heating expenses are predicted to increase about 15% this winter, more if you heat with oil or natural gas.

You might have thought we would get some reprieve from soaring energy costs, what with crude oil having come down so much in the wake of a financial crisis that has sapped demand worldwide. Unfortunately, crude-oil prices don't play into the heating-bill equation anywhere near as much as they do at the gas pump. It's the weather that is more likely to be the culprit.

That means your best hope of holding down heating bills rests with El Nino and an early spring.

-- Steve Kerch, assistant managing editor/personal finance

HOME EXPENSES

Consumers will get slammed by heating bills again this winter

U.S. households already shouldering financial strains aren't likely to catch a break this winter as they prepare to dial up their thermostats. Homeowners can expect to see their heating bills jump 15% over last year, the Energy Department's Energy Information Administration said in its annual winter heating outlook released Tuesday.

HEALTH CARE

Candidates lay out health reform but little resonates with voters

As the unemployment rate climbs in the wake of the U.S. economic crisis, health coverage is becoming a bigger issue for voters. But neither presidential candidate has staked out a health-care position that is resonating strongly with Americans -- unless they are uninsured or fear they soon could be.

Angst is rising, but many must forgo therapy

In the latest sign of the deepening economic crisis, more people are considering cutting back on their mental-health therapy, even as they become more stressed.

INVESTING

Paulson now a matinee idol as we take the fall for stupid stunts

Today's news is too hot, too juicy. "Wall Street, the Sequel," needs a new predator! A poster-boy for the arrogance, greed and incompetence of Wall Street and Washington. And "Hank the Hammer" Paulson wins hands down as the archetype of a modern global megapredator.

Black Monday for emerging markets ETFs

Exchange-traded funds tracking emerging markets stocks fell sharply Monday as investors sold risky assets on fears the deepening financial crisis could trigger a global economic slowdown.

Personal Finance: Deflating your debt

By PAMELA YIP / The Dallas Morning News
pyip@dallasnews.com

Like many Americans, Jackie and James Jensen are keeping a close eye on the economic turmoil.

They've both been laid off from jobs in the past and are afraid Mr. Jensen could be laid off again. They've watched the gyrations of the stock market and are worried about their 401(k) retirement plans.

Their previous economic hard times forced the Rowlett couple to become more disciplined with their money. The current crisis is reinforcing that view.

"It made us take a look at what we were doing," said Mrs. Jensen, who works from home as a reservations specialist for the Hilton hotel chain. "We started to evaluate what are our wants and our needs. Where are we blowing the money?"

Like the Jensens, many consumers need to rethink their spending habits and return to the basics of building a strong foundation in their personal finances.

"It's way past time for people to get back into reality," said Paul Richard, executive director of the Institute of Consumer Financial Education in San Diego.

"Pay down debt and quit taking on new debt. Get back to basics and quit overspending."

Here are some steps you should take to gain control of your finances:

Track your spending. If you want to save money, it's essential to know how much is coming in, how much is going out and where it's going.

"A budget should be a guide," said Lynn Lawrance, a certified financial planner at Financial Network Investment Corp. in Dallas.

Some consumers may feel that a budget or spending plan will crimp their lifestyle, but it's actually liberating because it lets you know exactly where every penny is going. You also have less chance of overspending and going into debt if you follow a budget.

how to be frugal ?. If you don't need it, don't buy it.

"Penny-pinching is not a bad word," said Rick Salmeron, a certified financial planner at Salmeron Financial Network in Dallas.

"Many people seem to equate this behavior with cheapness, but that couldn't be further from the truth," he said. "Being tight with your money is simply getting the most out of what you buy and not purchasing things that you really don't need."

Mrs. Jensen said she and her husband "took a look at where we were spending our money and what can we let go of."

One savings identified: Mrs. Jensen said she canceled long-distance service on her home office phone line.

"We took a look at the gas bill, we took a look at the water bill," she said. "Little by little, it all started adding up."

Pay off or pay down debt. Consumer debt is the real thief of your financial freedom. It sucks up your money, leaving you less – if any – money to save.

"In the age when spending-what- you-don't-have-today is promoted left and right, it's hard to imagine a time when people believed that debt should be avoided, but that's the behavior Grandma lived by," Mr. Salmeron said. "If she didn't have the cash, she wouldn't buy it."

Use credit cards only for emergencies or when a credit card is required, such as reserving a hotel room or a rental car or buying plane ticket.

Pay off your credit card bill each month so you don't rack up costly interest payments.

Your credit limit isn't your spending limit. Don't use more than 30 percent of your limit.

Don't ruin your credit. Pay your bills on time every month without exception, even if you can only make the minimum payment.

This is important because your payment history constitutes the biggest chunk of your FICO credit score, a barometer used by many lenders to decide whether to give you a loan.

Save, save, save. If you lost your job tomorrow or became disabled, how long could you last without a steady paycheck?

Financial planners generally recommended that you have savings equivalent to three to six months of bills stashed away. But you may need more.

Pay yourself first. The best way to do that is to put your savings on automatic pilot. Have an amount automatically deducted from your paycheck and put into a savings account each month.

You won't spend the money if it's not in your checking account.

Don't dis the 401(k). The 401(k) plan has become the predominant device for retirement savings for private-sector workers. As traditional pensions disappear and are replaced by the 401(k), the onus is on workers to use them to save and invest prudently for retirement.

So sign up for your employer's 401(k), especially if the company matches your contribution, which you should max out.

If you can't afford to max out your 401(k), contribute at least enough to get your employer's match. That match is free money, so don't leave it on the table.

Even if your employer doesn't match your contribution, it's still a good idea to open a 401(k).

That will give you a head start on retirement saving – and save you money on your tax bill.

Since your contributions are made with pretax dollars, your taxable income is lowered.

Invest for the long term. These are volatile times for investors, but you must stay grounded in fundamental investing principles:

•Focus on the long term. If you want to benefit when the market begins to recover, you must be invested. Some of the market's sharpest declines have been followed by the strongest rebounds.

•Make sure your investment plan matches your goals and time horizon, which is the length of time an investment is held before you cash it out.

•Make sure your investments are diversified.

"A properly diversified portfolio means more than having a collection of mutual funds," said Trudy R. Turner, director of tax and financial planning at Robertson, Griege & Thoele Financial Advisors in Dallas.

"Investments should be established in different sizes of companies, different industries, different markets, different investment styles, fixed-income and equity investments."

Plan for homeownership. Don't buy a home you can't afford – and that doesn't mean just the mortgage payment. You also must be able to afford the property taxes and the maintenance and upkeep.

The roots of the economic crisis lie in the easy credit that lenders provided, particularly exotic mortgages that many consumers didn't understand and that landed many in foreclosure.

But lenders are now returning to fundamental principles of prudent lending and ensuring that those who apply for loans can repay them.

Save for a down payment and clean up your credit if you've had problems.

"Lower interest rates will not help people with bad credit and no savings," said Craig Jarrell, president of the Dallas region of Pulaski Mortgage Co.

"We are back to the basics of common sense."

How To Make Fast Cash Using The Internet

Has the latest internet scams on how to make a million dollars hit you yet? If you are like so many other people including myself the sound of all that money just sounds to good to pass up right? Well, let me tell you a little secret about getting rich over the internet, its not going to happen unless you have the right system and even then it will take a lot of your time and dedication.

However, if you have a lot of free time from work or are interested in starting your own business then there really are a few ways to make some really good, fast money. The first thing you will need to do is start up what is called a marketing system. This is a very easy process and if done right can be started up for free. Now remember that there are many scams out on the internet who make their money by getting you to fall for something that sounds good.

I myself am a marketer and i make a very good living doing so. However, I also remember what it was like to start from nothing at all, Well, friends I used a product to get up on my feet and make some serious money as well. You too can start to put all kinds of extra money in your pockets or possibly start to make a full time income if you are willing to put forth the effort and are willing to give a new system a try.

Do you need extra money? Want a full time income using the internet? How would you like to make a thousand dollars or more a week and not have to worry about scams? If this sounds good to you then visit here zach1201.wordpress.com/2008/03/25/how-to-make-fast-cash-using-the-internet. This is the same system i used to make my business huge.

Debt consolidation: cure or continued credit problems?

Interest rates haven't been this low for decades, tempting some consumers to take on additional debt to ease existing credit woes. The goal is to consolidate various higher-interest balances into one, easier-to-handle and less-costly package.

But be careful of what looks to be a quick fix.

"You're getting symptomatic relief, not a credit cure," says Chris Viale, general manager of Cambridge Credit Corp., a nonprofit credit counseling agency based in Agawam, Mass.

This fighting-fire-with-fire approach can take several forms. There are debt-consolidation loans, balance transfers to a zero-percent credit card and home equity loans or lines of credit.

But, says Viale, 70 percent of Americans who take out a home equity loan or other type of loan to pay off credit cards end up with the same (if not higher) debt load within two years.

Viale's statistics underscore a major problem with debt consolidation: It feeds upon the tendencies that got you in trouble in the first place. By taking on yet another creditor, you're adding the proverbial fuel to the fire. In this case, it's your money that's burning.

Plus, if you've taken on so much debt that you're looking for more as a solution, chances are you won't qualify for the very low interest rates you see advertised. Those generally go to people with stellar credit ratings.

However, if you're at the end of your credit rope or swear that this time you'll be more disciplined, debt consolidation may be something to consider despite its risks. Here are some popular forms of debt consolidation, how they work and a look at their pros and cons.

Online Bad Credit Loans

1. Bad credit loans must be secured by personal belongings.

False They can be secured or unsecured. Secured means that there must be collateral attached. Failure to pay could result in loss of a home or other personal belongings. Receiving unsecured bad credit loans means no collateral is attached and approval for borrowing is on the ability to repay through income and past payment history.

2. Bad credit loans can be approved even if bankruptcy has been declared.

True They can usually be approved even if an applicant has recently declared bankruptcy, foreclosure, repossession or divorce. Many companies accept clients with bad or no credit history. Specialist companies who deal with lower than average credit applicants can be found easily on the Internet.

3. Bad credit loan clients who pay on time improve their credit score.

True Those who pay on time and in full will improve their credit score dramatically. They will later be able to apply for more loan programs with better interest rates. It can be an alternative way to begin building good credit for life.

4. Bad credit loans will have higher interest rates than standard loans.

True Since credit is not yet established the financial lending institutions are able to charge a higher interest rate. Most people would be approved for a standard loan, so the higher interest rate is charged for those that pose a higher risk to the lender. Interest rates can still be negotiated, and it is wise to obtain a copy of an individual credit report to know exactly where you stand from all the national credit bureaus.

5. Bad credit loans are a way for companies to extend grace.

True
Deuteronomy 15:7 - If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother:

Personal Finance, 8/e

Kapoor/Dlabay/Hughes' personal finance is the #1 market-leading personal finance articles. It provides comprehensive coverage of personal financial planning in the areas of money management, career planning, taxes, consumer credit, housing and other consumer decisions, legal protection, insurance, investments, retirement planning, and estate planning. The goal of this text is to teach students the fundamentals of financial planning so they can make informed choices related to spending, saving, borrowing, and investing that lead to long-term financial security. Personal finance informations, 8/e provides many financial planning tools using a step-by-step approach to help students identify and evaluate choices as well as understand the consequences of decisions in terms of opportunity costs.

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