ELoan, which is now owned by Banco Popular, currently has some of the best online CD rates just about all maturities on the BestCashCow.com CD tables. While the recent rise in ELoan's rates might be somewhat driven by Puerto Rico's credit problems, the CDs are issued by Banco Popular's NY branch and are fully FDIC insured (as long as you stay within FDIC limits). However, if you look at the terms on ELoan’s website, you’ll see that the penalties for early termination are extraordinarily onerous. ELoan charges 2 years of interest as a penalty for early termination of a 5 year CD, 1 year on the 3 and 4 year CDs, and 9 months on the 1 year CD. If you were to put $200,000 in a 5 year CD with ELoan and then either need the money or see much higher rates, you would be paying almost $5,000 in penalties to become liquid. Given the likelihood of dramatically higher interest rates, it would be foolhardy to tie your money up in a CD with such dramatic early termination penalties.
ELoan’s penalties are completely out of line with those of ELoan’s competitors. Albeit with slightly lower rates, Sallie Mae’s 1 year CD has a 3 month early termination penalty. Barclays Bank and Synchrony Bank offer online 5 year CDs carrying only a 6 month penalty (learn more about strategies involving these rates here). CIT Bank offers a 5 year CD with a 1 year early termination fee, and has very 1, 2, 3 and 4 year Ramp Up CDs that allow you to get a higher rate if interest rates rise (CIT’s Ramp Up CDs were named a BestCashCow.com Best Bet for 2015).
Given the likelihood of dramatically higher interest rates in the intermediate term - if not the near term - we feel that depositors would be much better served to look at these products and to avoid ELoan onerous early termination fees.
See and compare all of the best CD rates, online and available locally, here.
See all of the best CD rates here.