How to Borrow Against a Certificate of Deposit

Banks love to make loans to people with valuable assets; these assets are referred to as cushions of protection in the lending world. As they see it, they can't lose—if you default on your loan they will simply sell your assets. The best assets are those with the least amount of risk (as far as the bank is concerned). While your stocks may be valuable, the principal is not guaranteed; certificates of deposits (CDs), however, are. CD-based loans represent some of the most secure loans in which a bank can invest.

Contact the bank which issued the CD. Ask them to provide you with information about CD-based lending programs. If they don't have any, request information about secured loans. List the CD as collateral for the loan.

Calculate your net interest payment. Since CDs act as collateral, they continue to earn interest during the term of the loan. Interest should be in the range of two to three percent above the CD interest rate.

Ask your banker how they will calculate interest rates on the loan. Some banks have a certain dollar threshold. For instance, a $2,000 loan may be three percent above the CD rate, but starting at $5,000, the rate drops to two percent.

Shop around. Most banks will not lend against CDs issued by other banks, however, it does not hurt to ask. Smaller banks may accept your application.

Pay attention to the term of CD. If the CD has a term of one year, then so will your loan. If so, make a request to extend the duration of your CD.


  • Banks will generally lend 90 to 100 percent of the CD value.