Would This Be a Good Time to Borrow Against the Value of Your Gold, Silver, Platinum and Precious Metal Holdings?

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Written By Barry Lenson

Let’s say that you own precious metals and that you would like to borrow against their value.  If that is your situation, don’t be apologetic about it. In the current economic climate, many people need to raise cash. Some of those people are business owners who would like to be able to pay their employees until business picks up. Other people are in a crunch and need to liquidate assets so they can pay their mortgages, their children’s college tuition, or meet other financial obligations.

So, Can You Borrow Against the Value of Your Precious Metals?

Yes, you can. If you search online, you can easily find companies that are willing to write you a loan against the value of your gold, platinum, palladium, and silver. And you might consider it, depending on how badly you need to raise money.

However, there are a number of conditions you should think about before you decide to borrow, including:

The economy could improve sooner than you expect. We do not know how soon American businesses will reopen, or how quickly the economy will rebound. Nobody knows. Yet the fact is, things could improve sooner than you think. And for some of the reasons we will outline next, taking a second mortgage or exploring other borrowing options could be less risky and more advantageous.

When you are borrowing against the value of your precious metals, you are betting that trading prices will remain at about their current levels or rise. If you borrow, say, $50,000 against the value of your gold bullion and the value of that bullion falls below $50,000 – well, then you are holding some pretty bad debt.

Other expenses can come into play. Companies that lend money against the value of precious metals want to be sure that those metals are safely stored in safety deposit boxes or in qualified and secure precious metal storage facilities. And those options can cost money! Another way of looking at it is this: Lending companies will not loan you money against any assets that are stored in unsecured places, like in your dresser, a safe in your house, or in your garage. Plus, you should insure your holdings so you will be protected if they are stolen, burned up in a fire, or lost in other unpredictable ways. This is another reason why borrowing against the value of your precious metals might not be a good idea.

You could lose your precious metals if you do not repay your loan on schedule. Okay, this will probably not happen to you. But because it could become a possibility if the economy really worsens, we decided to point it out to you in today’s post.

Smarter Options

One way to contain your risk is to borrow against only a small portion of what you own. Let’s say, for example, that you own $100,000 worth of gold, but you borrow against only $5,000 or it. That exposes only $5,000 of your holdings to risk of loss.

You could also consider giving a certain amount of your holdings to a charity, hospital, college or other qualified institution, and taking the value of what you donated as a deductible expense on your taxes. In years past when the economy was more stable, this was a reliable strategy used by many well-to-do individuals. It seems riskier today. One reason is that if your income falls in the coming years, the return you will get from making charitable deductions could decrease, meaning you will get less money for every dollar’s worth of assets that you donate.

Another smart option is to recycle any gold, silver, platinum or other scrap with a qualified precious metals refinery, and to ask that refinery to hold your metals and sell them when the market rebounds. If that option appeals to you – and it should – call Specialty Metals Smelters and Refiners today at 800-426-2344 to discuss your options.

We are all going to get through the current crisis, probably sooner than many of us expect. Let us help you define your strategy for keeping your precious metals holdings secure while they appreciate in value.

Barry Lenson
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