Ever Heard of a MELOC? What You Need To Know About a Metals Equity Line of Credit

Precious metals like gold and silver can be valuable components of a balanced, diversified portfolio. Historically, they have been used as long-term stores of value for investors. Precious metals can help you preserve asset value and gain steady growth over time.

You may want to hold your gold or silver for a long time, even forever. But you may encounter some large purchases to finance over the years, or you may even want to use the leverage to buy more precious metals. How can you tap the value of the precious metals you own without selling them while funding your changing needs? Borrowing against the value of gold and silver is one option. 

Turning long-term investments into ready cash

Precious metals are typically considered long-term investments. They can also protect your portfolio against inflation and a fall in the value of the U.S. dollar. They have historically held their value, and even appreciated, when the world economies turn risky. In fact, they can be a great investment for periods of economic and political turmoil.

With all of these investment benefits, most find that it doesn’t make sense to sell gold to pay for a new deck or to finance a second home near the grandkids. But you can still access the value of your precious metal holdings through a specialty loan called a metal line of credit, or MELOC. 

How MELOCs work

A MELOC works a lot like a home equity line of credit. You borrow against an asset you own to create a line of credit, an amount you can tap at any time for your expenses. Typically, a MELOC provides a five-year, revolving line of credit secured by the gold or silver you own.

To qualify, you’ll have to transfer the physical precious metals to Battle Bank storage at Brinks, and we will store them until the loan is closed. Battle Bank will lend up to 50% of the metal’s value with a minimum pledged collateral amount of $100,000 loan size of $75,000. MELOCs from Battle Bank have an origination fee, and an annual fee. Advances on the line of credit can be easily advanced into your Battle Bank account or to your account at another bank.

The advantages of MELOCs

Battle Bank MELOCs offer compelling features and benefits including:

• Convenience: You’ll have fast, easy access to cash whenever and wherever needed. You can apply online, and most loans processed within a few days. 

• Flexibility: You can borrow against the value of your holdings any time, but you don’t have to use it right away. You can save it for emergencies. A MELOC can be your just-in-case option, a rainy day fund of $75,000 or more.

• Competitive interest rates: You’ll pay interest at the low rate of Prime (as quoted in the WSJ) + 2.75% adjusted daily, and you only pay on the amount you borrow.

• Security: Your gold is stored with Battle Bank’s storage partners, Brinks, where it remains safe and secure.

Be mindful of the risks

Before you open a MELOC, make sure you understand the risks to your loan and asset valuation:

• Exposure to price fluctuations: Gold and silver prices go up and down over time. If the value drops significantly, your collateral may not be enough to support the loan’s value. In that case, we will let you know if and when you need to send additional funds to cover the difference. You also have an option to sell some of the metal. In extreme situations, when metals prices drop very sharply and the value of the loan rises to 90% or more of your holdings’ value, we may be required to liquidate your holdings. 

• Limits on loan size: Because a precious metal loan is made against the value of your holdings, you can’t borrow more than you own.

• Availability of other options: There are other asset lines of credit available in the marketplace, so be sure to do your research since a MELOC may not be the best fit for your current or future needs. Whether it be a home equity line of credit or line of credit on your investment securities, each loan type comes with a different pricing structure and terms.

Not all banks offer MELOCs

Gold and silver can be great safe-haven assets. While they’re beautiful, valuable, and a good hedge against financial and market risk, keep in mind that they are not very liquid. MELOCs let you turn your precious metals into ready cash without the need to sell your long-term holdings. 

Most banks and lenders don’t offer MELOCs because they don’t understand precious metals. Battle Bank is different. We’re familiar with the unique characteristics of precious metal, and we’ve used this knowledge to create a simple, fast way to use your metals holdings to get the cash you need, when you need it.