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The Bad Guy
08-07-2009, 01:35 PM
My wife's grandparents are going to be loaning us money to use on a land purchase. We are going to work out a payment plan to pay them back.

One problem is that their money is tied up in CDs. They said there might be a withdrawl penalty on it. How much typically is that? I'm not at all familiar with CDs.
Amnorix
08-07-2009, 01:36 PM
Generally something like 3 months of interest. Easiest would be to add to the principal balance of the amount you are borrowing, AS IF you had borrowed it, and then pay it back along with the rest, plus interest on it if you're paying interest.

In other words, you pay the penalty, not them.
Nightfyre
08-07-2009, 01:41 PM
You could also collateralize a loan with a cd at a rate like a quarter point above the cd rate.
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The Bad Guy
08-07-2009, 01:41 PM
Generally something like 3 months of interest. Easiest would be to add to the principal balance of the amount you are borrowing, AS IF you had borrowed it, and then pay it back along with the rest, plus interest on it if you're paying interest.

In other words, you pay the penalty, not them.

Exactly. I'd pay the penalty for them up front. I was also told that the penalty is tax deductable.
Stewie
08-07-2009, 01:42 PM
If your grandparents are going to loan you the money, why not have a bank loan you the money with the CDs as collateral? That way they don't have to mess around with cashing CDs and you'll get your money. Just a thought.
The Bad Guy
08-07-2009, 01:43 PM
If your grandparents are going to loan you the money, why not have a bank loan you the money with the CDs as collateral? That way they don't have to mess around with cashing CDs and you'll get your money. Just a thought.

Because they are being really flexibile with us and don't want to be paid back for a long, long time.
Nightfyre
08-07-2009, 01:44 PM
If your grandparents are going to loan you the money, why not have a bank loan you the money with the CDs as collateral? That way they don't have to mess around with cashing CDs and you'll get your money. Just a thought.

Riposte! But good plan, really.
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Stewie
08-07-2009, 01:46 PM
Riposte! But good plan, really.
Posted via Mobile Device

Heh! I saw your post. Your brevity won the day.
Demonpenz
08-07-2009, 01:57 PM
what kind of cd's? They like wu-tang?
wutamess
08-07-2009, 02:06 PM
Because they are being really flexibile with us and don't want to be paid back for a long, long time.

Long Long Time... how fugging ould are her grandparents?
kepp
08-07-2009, 02:09 PM
I was also told that the penalty is tax deductable.

For them though...not you, right?
Nixhex
08-07-2009, 02:22 PM
As previously posted they should be able to get a loan using the CD as collateral for an interest rate slightly above what the CD is earning. Best way to go here.
Demonpenz
08-07-2009, 02:24 PM
As previously posted they should be able to get a loan using the CD as collateral for an interest rate slightly above what the CD is earning. Best way to go here.

yeah but the banks always want to get paid back grandparents are likely to die. WIN
The Bad Guy
08-07-2009, 02:37 PM
For them though...not you, right?

Yes it would be for them. I'm just checking that that's true.