Business and finance background. Rows of golden and silver bars
If you’ve ever had a situation in which you needed quick money, you may have heard about bullion loans. These have become very popular with precious metal prices skyrocketing. Unfortunately, there’s some misunderstanding about what it means to take a silver or gold loan.
Some benefits of these loans — such as easy access to money — are pretty straightforward. Many people who forego these monetary options, however, aren’t aware of the other advantages they offer. Of course, there are also a few potential drawbacks.
At Silver Gold Bull, we strive to ensure our clients are fully informed of their investment options. This in-depth guide focuses on accomplishing that feat by helping you understand silver and gold loans. When you’re done reading, you’ll know if this money lending option is right for you.
Bullion loans are a type of consumer credit with gold and silver serving as collateral. When you buy gold bullion or other precious metal items, it’s often because you intend to store value as an investment. These loans do not interfere with this goal; in fact, they can further it.
Silver and gold loans aren’t a novel innovation. Lending money against valuable items has been commonplace for over 3,000 years, and people have long considered precious metals valuable. The emergence of bullion loans online is certainly new, but that’s only due to the recent development of the digital world.
There are multiple lender types that offer temporary capital for bullion, and some are certainly better than others. We’ll discuss several of these options later in this guide because it’s important to understand the risks and benefits of silver and gold loans first.
Borrowing money against precious metals carries a variety of advantages over other lending options. By understanding these advantages and what you’re getting, you’ll be able to make a more informed decision based on your personal financial goals.
When you’re applying for a new credit card or seeking a home loan, you can expect lenders to delve into your credit history. That won’t be the case with a bullion loan, however. Your precious metals serve as collateral when borrowing, so your past finances are irrelevant.
Most consumer loans take a fair amount of paperwork and time to process, which can be a major issue if you need money quickly. Fortunately, the processing time for silver and gold loans is relatively short. Once a lender verifies that your gold is real, you can get a check as soon as the next day.
One of the best things about loans with silver and gold as collateral is that they protect your other assets. Sure, you could sell 100 shares of a profitable stock to get quick cash, but you would no longer own that asset.
Why get rid of your other investments when you can safely borrow against your precious metals?
Compared to other types of consumer loans, those based on bullion have relatively low interest rates. This is especially the case when you need to borrow money quickly. Title loans and payday loans, for instance, have annual interest rates of 300% and 391%, respectively.
You did not read that wrong. Unfortunately, quick money is usually very costly. If you borrow from a reputable bullion dealer against your own precious metals, though, you can save a ton of cash over the course of your loan.
One of our favorite benefits of bullion loans is also one of the most important: there’s no need to prove income. This is a necessity with many other lender types. They want to know for certain that you can make payments on time and won’t default on the loan.
When you borrow against precious metals, though, your income information is less important. That’s because your property backs the loan, so there’s less risk of default. This was an especially beneficial advantage for many folks who were laid off during the global pandemic.
You could contact a reputable precious metals dealer and sell gold and silver to them right now. This is a quick process, and you’d likely get more money than a bullion loan would offer. Like selling other assets, though, you’d end up sacrificing your smart investment forever.
People buy precious metals because they’re great stores of value. Fortunately, you don’t have to sell the items to gain access to that value because it’s there the entire time you own it. When you take out a silver or gold loan, you’re taking advantage of stored value while maintaining your ownership.
While loans taken out against bullion certainly have many advantages, they also have a few drawbacks. These don’t dissuade most people who would benefit from them, but as with any financial choice, you should have all available information before making a decision.
While on par with many other loan types based on collateral, borrowing against bullion carries high margins. You can typically borrow only about 70% of the value of your precious metals. If you have $1,000 in gold, for instance, $700 is likely the most you’ll get.
In this example, a margin of $300 would remain for the lender in case you failed to pay them back. For most people, though, 70% is a fair amount. This is especially the case since your property gets returned to you whenever you finish paying off the silver and gold loan.
This is definitely a worst-case scenario, but the potential exists for you to lose your precious metals. Like any other loan based on collateral, you’re receiving money backed by your bullion. If you don’t pay back the loan, however, you forfeit the property.
This can be devastating — especially since you likely would’ve gotten more from selling it from the beginning. As long as you’re careful to pay off your loan on time, though, this won’t be an issue.
The average personal loan — depending on where it’s received — can extend longer than five years. When you take out a bullion loan, however, the term is typically much shorter. For most people who just need a temporary influx of capital, this isn’t a big issue.
But if you need money for a longer span of time, this could make things difficult. The important thing to remember is that shorter loan periods cost you less in interest. If you need longer loan terms, though, it doesn’t hurt to ask what bullion dealers can offer.
Some people have likened gold and silver loans to pawnshops since they both lend money based on collateral. In reality, these two options couldn’t be more opposite. The biggest difference is storage. With bullion dealers, your metals remain vaulted rather than in a retail store.
Another major advantage of bullion loans over pawnshops is the amount of money you can get. While a reputable precious metal dealer may loan around 70% of your gold and silver value, pawnshops only offer between 25% and 50% on average.
If you’re offering such a valuable investment as loan collateral, you should at least be able to get a fair price. Achieving this at a pawn shop can prove difficult.
Whether you’re still recovering from the pandemic or need extra capital for a new investment, securing a bullion loan is a simple and efficient solution. Although you can access the value stored in your precious metals by selling it, this isn’t an absolute necessity.
When you’re reviewing your loan options, though, make sure you find a provider that meets your needs. There are many predatory lenders out there, so spend the extra time researching the reputation of firms you’re considering. Doing so will protect you and your precious metals.
At Silver Gold Bull, we’ve spent over a decade offering services like bullion loans to more than 100,000 clients. Plus, we’ve established a solid reputation in the industry, so you can trust your investment is safe in our hands. Visit our Silver and Gold Loan page to get started today.
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