A Pledged Asset Line® from Charles Schwab Bank can help you leverage the value of your investments. This revolving line of credit allows you to borrow against the value of eligible assets without liquidating your investments.
It's a non-purpose revolving line of credit from Schwab Bank secured by eligible assets held in a separate Pledged Asset Account (PAASB) maintained at Charles Schwab & Co., Inc. ("Schwab").
Proceeds may not be used to purchase securities or to pay down margin lines, and may not be deposited into Schwab brokerage accounts.
Line amounts range from $250,000 to $15,000,000. Clients may be able to borrow up to 70% of the value of their eligible assets pledged as collateral. (Please note that your actual advance rate may be lower.)
Up to 75% of your total liquid non-retirement assets may be pledged. Assets at another institution must be verified to be included.
Individuals, joint borrowers, and revocable living trusts with identical trustee, trustor, and beneficiary are all eligible.
Terms of up to five years are available.
Rates are based on the market-driven one-month LIBOR (London interbank offered rate) plus an interest rate spread. The interest rate spread is determined based on the maximum Pledged Asset Line amount. (Note: Applications received prior to November 1, 2013, may still be based on the three-month LIBOR index.)
There are no application or account set-up fees. In addition, many account maintenance fees—such as wire fees, returned payment fees, draw fees, and check fees—have been eliminated.
The only fees applicable to the account are late fees. As long as there is available credit to cover the amount of interest due, interest capitalization will be done so that no monthly payment is required and no late fees will be assessed.
There is no fee to establish or maintain the Pledged Asset Account; however, standard trading commissions will apply to all trading in the Pledged Asset Account.
Schwab Bank requires that the assets pledged as collateral for the Pledged Asset Line be held in a separate Pledged Asset Account (PAASB) maintained at Schwab. Schwab Bank establishes collateral requirements regarding the type of assets, value of assets, and concentration of assets that are eligible to secure the Pledged Asset Line, and reserves the right to change the requirements from time to time. Collateral requirements are based on the maximum Pledged Asset Line amount and must be satisfied in order to borrow on the Pledged Asset Line and to maintain the Pledged Asset Line in good standing.
A PAASB is a Schwab brokerage account that holds assets pledged as collateral for the Pledged Asset Line.
Because the PAASB holds collateral for the Pledged Asset Line, it is treated as a cash or non-margin account. The following limitations have been established on the PAASB:
– No margin capability
Brokerage products are:
There is no fee to establish or maintain a PAASB, but standard trading commissions will apply to all trading in the Pledged Asset Account.
Neither Schwab Bank nor Schwab provide investment or financial advice with respect to the PAASB, any assets to be pledged in the PAASB, or any transactions therein.
Entering into the Pledged Asset Line and pledging securities as loan collateral involve a high degree of risk. Before you decide to apply for a Pledged Asset Line, make sure you understand the following risks, which are detailed further in the Pledged Asset Line application:
Servicing your Existing Pledged Asset Line Accounts
There are three ways to make a payment to your Pledged Asset Line:
Charles Schwab Bank
Interest accrues daily and is payable on the 15th of each month, but may be added to the principal amount of the loan if there is sufficient availability on the Pledged Asset Line. If the Pledged Asset Line does not have sufficient available credit, monthly interest payments will be required and will be reflected on your monthly statement. Principal, unpaid interest, and other fees, if any, are payable at maturity.
Forms for Existing Pledged Asset Lines
Charles Schwab Bank
Charles Schwab Bank and Charles Schwab & Co., Inc. are separate but affiliated companies and subsidiaries of The Charles Schwab Corporation. Brokerage products and services, including the Pledged Asset Account, are offered by Charles Schwab & Co., Inc., Member SIPC, and are not insured by the FDIC, are not deposits or obligations of Charles Schwab Bank, and are subject to investment risk including possible loss of principal invested. Deposit and lending products, including the Pledged Asset Line, are offered by Charles Schwab Bank, Member FDIC and an Equal Housing Lender. Charles Schwab Bank is not acting or registered as a securities broker-dealer or investment advisor.
Margin Risk Disclosure Statement
© 2014 Charles Schwab & Co., Inc. All rights reserved. Member SIPC. (0114-0613)