Why use Gold as Collateral for Loans.

Why use Gold as Collateral for Loans

All loans involve an element of risk. They require you to commit to future payments, when you are usually already in a financially tight situation. However, some loans carry more risk than others. If you have the option to use gold as a loan collateral, your overall risk can be reduced. So how does this work?

Why is Gold Valuable?

Across the world, people and countries have used gold in various ways for centuries. It’s been valued as a trading commodity and used as a currency. It’s been used in dentistry for over 2000 years! Gold is naturally beautiful and easy to work with. As a result, it’s adorned people as cherished jewellery, had decorative ornaments made from it and been hoarded as treasure. In more recent decades, it’s been used in electronics as well as within the aerospace industry.

The Gold Standard was a system by which most countries across the world linked and fixed their currency value to. For many years countries used it to back their currency and assist with international trade. The gold standard was introduced in 1821 and widely adopted across the world by the 1870s. During the 1930’s Great Depression, countries stopped using it and by 1937 no one used it anymore. However, post-World War II, two interlinked currency options emerged. Exchange rates could be pegged on a new minimum US Dollar price of gold or alternatively to the US Dollar. Additionally, many countries still revert back to using gold as their reserve currency during recessions.

What is a Gold Collateral Loan?

Gold has consistently been valued over time. This makes it a good collateral to use for a personal or business loan. A gold backed collateral loan, allows you to pledge your gold or gold jewellery in exchange for cash. It is also known as a gold loan or loan against gold.

How Gold Collateral Loans Can Reduce Your Risk

Using gold and gold jewellery to secure a loan makes the loan less risky to you. This is because it’s something you already own, as opposed to future income you expect to receive. As the lender has the assurance of a secured item, gold collateral loans are quite likely to have flexible and easier loan terms. Thus, a gold backed loan may prove to be cheaper to pay back than loans relating to future income.

Sometimes unexpected things happen and you can’t pay back a loan. Defaulting on a gold loan usually does not have additional consequences. This is because not paying means forfeiting your collateral gold item. So, while it may have sentimental value, your home assets won’t be used to recover any outstanding loan costs.

Reducing your loans risk is especially helpful if you need a business loan. Starting or investing in a business carries risk in and of itself. By securing a business loan using gold you already own, you are better protecting your business against potential loan associated risks. If something goes wrong and you default on loan repayments, no one is going to come and repossess business assets. This could make an already vulnerable business more vulnerable or even lead to its closure. Additionally, your family’s assets will be protected as they wouldn’t be needed to settle a gold backed loan.

3 Benefits of a Gold Loan

1. 1. Easier & Less Paperwork: : No need for credit, employment or blacklisting status checks. Only an identification document is necessary.
2. 2. Attractive Interest Rates: Interest rates associated with gold loans tend to be more competitive than, for example, car or personal loans interest rates.
3. 3. Quick Cash Access: After gold is assessed, the loan agreement process is uncomplicated and therefore your cash can be immediately available.

Where to get a Gold backed Collateral Loan

Coughlans offers free assessment of gold and gold jewellery intended to be used as a loan collateral. Terms & Conditions of loans are flexible and easy. And your gold item(s) are security stored while you redeem your loan.