Buying Gold Using Personal Loans
Personal loans can also be used to buy gold and silver. However, you can only do that if the return for investment on gold is higher compared to the interest rate of the loan.
Basically, gold suddenly becomes a stable investment which can suit your financial needs in times you need it. In fact, professional investors tend to wage their money on gold during times of turmoil in the economy. Basically, getting a personal loan would be a good idea if the rate of the loan is lower compared to the ROI on gold.
Personal loan as payment to gold investment
Typically, the number one reason why investors are using their personal loan in buying gold because of the low-interest rates and the gold price is quickly increasing. There may be times that the gold price can go up to a higher rate compared to the amount of your loan interest. However, this is not always the scenario and not an ideal investment technique for everyone.
Generally, depending on the time period, the return of investment for gold may usually vary. Let’s take a look at the price of gold within the past years. Its price generally increases by greater than 29%.
Knowing this, you would rush out to buy gold for yourself. However, you must also be aware that during the last ten years, the increase in gold’s price is only about 16.76%. Usually, this gold’s price is only manageable to have an annual return of about 1.56% which is typically lesser to the amount of interest to be paid.
PROS for gold investment through loans
Basically, the main advantage of borrowing personal loans to buy gold investment is that it is less volatile compared to other stocks. But, always keep in mind that there are still losses you could face based on volatility.
CONS for gold investment through loans
Check below for some of the downsides of putting your personal loans in gold.
- Generally, qualification for a personal loan that has a lower interest rate is not applicable to everyone. Basically, the lower interest rate that is sufficiently lower to guarantee that they headed off after the increase in gold value may be the reason for disqualification.
- The risk involved in investing in gold is numerous. The moment the price of gold decreases, you might fall on not making enough money on your end. So, this means that it is not an ideal investment for those who cannot afford to lose some of their investment.