If you’re in a pinch and can’t borrow money from any other place — like a personal loan or a 401(k) loan — or don’t have access to a credit card, a CD loan is a good option. People with long credit histories and a good credit score will benefit the most, as these borrowers can borrow a larger sum of money at a low interest rate. But if your credit score is on the lower end, a CD may still be ideal since you’ll build positive credit history over time, assuming you make timely loan payments.
A CD loan is also a good option for individuals who want to pull from their CDs’ funds without facing early withdrawal penalties. While you’re not technically borrowing from your CD with a CD loan, you may be able to borrow up to the amount currently in your CD.
Before committing to a CD loan, compare any loan fees to the CD’s early withdrawal penalty. If it would cost less to simply withdraw all the funds in your CD before it matures, a CD loan may not be the best option.
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