Okay.
What am I missing here.
I talked with friends and my parents about this one.
They all say there’s a catch why you can’t do it.
But they don’t know what it is.
So uhm… hlap?
My Credit Union offers a loan at 4.45% APR.
Loan is whatever in the hell you want to do with it.
So, Why can’t you take out a loan with it, say… a Five year loan at 4.45%
Then, they also offer a 1 Year CD at 5.10%…
So, why can’t you take out a loan, Put it in a CD, then use the CD after it matures to pay off the loan?
You’ll have to make monthly payments out of pocket I assume, yeah…
But you’ll end up getting that back at the end of the year.
Okay, don’t do this unless you have some very preferential rates.
Let me break it down:
On $1000, you’ll pay $18.67/mo for 12 months.
Come month 13 of the loan, remaining principal owed will be $802.12
You’ll have paid $41.73 in interest.
If you close the CD you’ll have $1,052.21
Pay off the principal of the loan @ $802.12
You’ll have $250.09 in your pocket. This is NOT WHAT YOU PROFITED
Not the brightest move. You’re basically opening a savings account with a interest rate of 1.10% APY.
Just so you realize what you’re talking about:
If you had put the $1000 (no loan) into a regular savings account (daily compounding) @ 4.25% APY (a very common rate right now), it would’ve taken you 89 days to earn $10.68 in profit.
Well.
I have an account at bank of america… My savings account there is at .2%
She said the highest I could ever get with bank of america is a business account and that would be .25%
So I wasn’t really sure what to do.
Online I saw 5.05% and such, but I’m not really sure how safe those kind of bank accounts are.
Thanks a bunch, lol.
The low interest loan and stuff was through a Credit Union, not Bank of America.
The Credit Union I rarely do anything with. The Saving account I have there is 1.19% APY
HSBC & M&T Bank are both large local banking companies and they are both offering “online” savings accounts which pay more then 4.00% APY, daily compounding, with no fees or minimum balances.
They are more then safe. FDIC insurance upto $100k.
“Online” simply means that there is no overhead for the bank to pay on these accounts. You open them online, print a form, sign it, mail/fax it in. Voila.
Overhead meaning: the bank did not have to pay a teller to sell you the account; pay an account rep to sit down & chat with you for an hour; pay for the electricity for you to be able to sign the paperwork (which they also pay for) in the warm lighting of a branch office; etc…
You CAN STILL ACCESS THE ACCOUNT VIA WEB & TELEPHONE & BRANCH banking.
