CD secured loans are much like share secured loans, but they use the money in a CD as the collateral. They are mostly used for building credit.

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The interest rate for CD loans is 2% above the annual percentage yield (APY) of the CD securing the loan.

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• Make sure to add the CD account to the collateral tab of the loan in Forza. This needs to be printed on the Loan & Security Agreement & Disclosure Statement in the property field.

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• Key the member's credit score on the Credit Score Tab under the Credit Bureau Score as 999 and leave the Credit Union Score side blank.

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• Include an application and the pledge agreement in the loan docs.

  • Proof of income, credit report and debt ratio are not required, but should be included if they are available.

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*IRA CDs cannot be used as security for CD Secured loan.

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The loan term cannot be longer than the CD term. An existing CD may be used, but the loan term cannot be longer than the remaining term of the CD. In other words, the maturity date of the loan cannot be later than the CD maturity date.  

 

The balance of the loan should never be more than the balance of the CD. Loan policy states that "as the loan is paid down, withdrawals from the certificate will be allowed down to the balance of the loan.  No more than one withdrawal per year will be allowed, until the loan is paid off or the certificate is released as collateral." Any early withdrawal is NOT free from the early withdrawal penalty.

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If the owner of a CD securing a loan requests to use their One-Jump option, the rate on the loan would need to be increased to maintain the 2% difference between the CD and loan. This can be done with a Subsequent Action signed by the Borrower(s). 

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