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Home >> Accounts >> Certificates of Deposit
Borrowing Against my CD
If I own a CD with one bank and have borrowed money against it, is it possible to borrow with another institution on that same CD?
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 Most Certificate of Deposits today are not transferable. Most are also electronic, which means that the paper certificate isn't actually produced, so the chance that you can borrow from another bank against that deposit exists, but it is slim, and not fiscally sound.
If you borrow from the bank that has the CD on deposit, you will get a much lower interest rate. That bank has virtually no risk of loss because if you don't pay, they cash in the CD. A loan at another bank will cost more, because they don't have the deposited CD and it would take more work to get that money to pay the defaulted loan. Also, the bank of deposit has to allow the lien on the CD and they may refuse.
If you have one loan against the CD now, a second bank wouldn't want it as security since a default on the first loan cashes in the CD, leaving that second bank with no collateral at all. Go back to the first bank, and recognize that you are limited in the amount you can borrow with this collateral.
Published on BankingQuestions.com 9/24/09
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