Can You Use Personal Loans to Buy Gold or Silver?
You can typically use a personal loan for anything—including buying gold or silver. You should only do so if you expect the return on your investment to be higher than the interest rate you pay on your loan.
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Gold and silver traditionally have been seen as stable investments that are particularly suited for times of financial uncertainty. The old wisdom goes that when the stock market or economy is in turmoil, investors put their money in commodities like gold and silver.
You may be wondering if using a personal loan to buy gold or silver is a good investment strategy. If you are able to get a loan with a rate lower than you expect your return on investment to be, then this may be a good idea, but there are other factors to consider, as well.
Using a Personal Loan to Buy Gold and Silver
The reason some people use a personal loan to buy gold and silver is that when interest rates are low and the price of gold and silver is going up quickly, the price of gold and silver could increase at a higher rate than the amount you’ll pay in interest on your loans.
Of course, this isn’t a good investment strategy for everyone. Below you will find some personal loan lenders you may want to consider to buy gold or silver as well as some pros and cons of this strategy.
Personal Loans to Buy Gold or Silver
- Rates are typically between 8.41% and 35.99% APR1
- Funds can be received in as fast as one business day
- A minimum credit score of 600 in most states
If you are interested in seeing other options, check out our guide to the best personal loans.
Here is a look at some of the pros and cons of using a personal loan to buy gold or silver:
Why a Gold or Silver Loan Makes Sense
- From our perspective, there are no pros to taking out a personal loan to buy gold or silver
Why a Gold or Silver Loan Doesn’t Make Sense
- Not everyone will be able to qualify for a personal loan at an interest rate that’s low enough to ensure they come out ahead after factoring in the increase in value of gold or silver.
- There is plenty of risk in this investment. If the price of gold or silver goes down, then you might not end up making money. Therefore, it wouldn’t be a good investment for anyone who can’t afford to lose part of their investment.
What Are the Returns on Gold?
With current interest rates, would you make money borrowing to invest in gold? Gold returns can vary greatly depending on the time period. For example, in the past year, gold has increased in price by more than 29%.
That might make you want to rush out and buy gold, but you should know that in the past ten years, gold has increased in price by only 16.76%, which works out to an annual return of 1.56%—less than the amount you would have likely paid to borrow money over those ten years.
What Are the Returns on Silver?
Did silver fare better over these same time periods?
In the past year, silver increased in price by over 19%. In the past ten years, however, silver decreased in price by 4.7%.
As you can see, the price changes fluctuate considerably over time. If you are taking out a personal loan to buy silver (or gold) you are taking a big risk that your investment will go down over time or won’t increase in value enough to cover the interest you will pay on your loan.
Using a personal loan to buy gold or silver is a risky investment, and you should consider whether it’s a good idea given the market before making any decisions.
But even if you are a sophisticated investor and think you can predict when the price of gold or silver is set to skyrocket, you may be wrong and end up losing money.
1The full range of available rates varies by state. The average 3-year loan offered across all lenders using the Upstart platform will have an APR of 21.97% and 36 monthly payments of $35 per $1,000 borrowed. For example, the total cost of a $10,000 loan would be $12,646 including a $626 origination fee. APR is calculated based on 3-year rates offered in the last 1 month. There is no down payment and no prepayment penalty. Your APR will be determined based on your credit, income, and certain other information provided in your loan application.
Author: Jeff Gitlen, CEPF®