The 38-year-old Tampa, Fla., man admitted he swindled Park Avenue Bank, a now-defunct Georgiainstitution, out of a $3 million loan that he never repaid. Prozer paid a co-defendant $25,000 to falsify a document claiming he had more than $21 million on deposit that could be used as collateral.
whats the point of using a deposit at one bank as collateral for a personal loan from another.
any other reason other than the deposit is locked up as a CD?? i can understand if someone has an investment portfolio and just needs cash, but why go to a different bank?
is there money to be made by trading CDs and loans between banks?
i know rates vary, but just seems that with such low rates + any fees its not worth it for a few million dollars.
You take out a sum of money, post it as collateral, use it to borrow a larger sum; rinse and repeat. If you can manage to pull this off before the first loan hits the credit report, you can borrow a substantial some of money.
I think the point is just to show that you have enough assets such that a $3 million loan is not a big deal.
In banking, some people wanting a loan use CDs as collateral – just like they’d put up their house or car. And what Bpdulog said.
Why would you take out a loan to buy a new car when you have $25000 in the bank?
Because you pay it back over time, not depleting your assets all at once.
You can keep the CD as emergency cash, for example.