Common questions about Schwab Bank's Pledged Asset Line^®

A PAL is a line of credit that allows you to borrow against your non-retirement assets held at Charles Schwab & Co., Inc. ("Schwab Brokerage") without having to liquidate your investments.  A PAL can help you keep your long-term investment strategy intact. 

Once approved, proceeds from a PAL can be used for a wide range of financial needs such as home purchase or renovation, tax payments, new business startup costs, and more. However, PAL proceeds cannot be used to purchase securities, pay down margin loans, or be deposited into any brokerage account. 

In most cases, funds are available upon loan approval. There is no minimum draw requirement or maturity date. Plus, you decide when to use your line of credit, assuming the loan value of collateral in your Pledged Account has not fallen below the minimum loan value of collateral (currently $100,000).

With PAL there are no application fees and no account opening or maintenance fees. The only fee associated with your line of credit, if applicable, is a late payment fee of $25.

Your assets (typically eligible securities such as stocks and bonds) are pledged as collateral and held in a separate account known as a Pledged Account. More details on the Pledged Account can be found below.

• Individuals (borrowing either individually or jointly)
• Revocable trusts
• Irrevocable trusts
• Organizations (Partnerships, LLCs, Corporations)

(Non-profit accounts currently are not eligible.)

The Pledged Account is a special account set up at Schwab Brokerage. This account holds the assets that have been pledged as collateral for the line of credit.

Here's how it works:

• During the PAL application process, you determine which eligible Schwab Brokerage accounts you would like to pledge as collateral for your PAL.
• If your PAL is approved, the selected Schwab Brokerage account(s) will be converted to a Pledged Account(s). There are no account opening or maintenance fees for the Pledged Account (brokerage commissions and other fees may apply).

There are limitations to the Pledged Account:

• No margin capability.
• No option trading.
• No payment features, including check writing, debit card, or bill pay privileges. If these features are important to you, considering opening a new account specifically for pledging assets.
• Settlement terms require cash in advance.

At all times, the loan value of collateral of the assets held in the Pledged Account(s) must be equal to or exceed the greater of (i) the minimum loan value of collateral (currently $100,000) and (ii) the outstanding loans.

Once your PAL is approved, you can view your PAL by logging into Schwab.com (or the Schwab Mobile app) and visiting the Account Summary page.

By clicking on your PAL account, you will be able to see important details such as your loan balance, current interest rate, available credit, collateral value, payment details and more.

PAL payments are due on the 15th of every month, and you can make a payment using one of four methods:

• Online transfer: Transfer funds online from your non-pledged, non-retirement Schwab Brokerage accounts or Schwab Bank accounts on the Transfers & Payments page (under Move Money) on Schwab.com or the Schwab Mobile app.
  • Select "Online Transfer" and select "Cash Only" transfer.
  • Under "From", select the Schwab Brokerage or Schwab Bank account you plan to use for your payment.
  • Under "To", select the PAL for which you want to make a payment. Select the amount you wish to pay and select "Continue." Finally, review and submit your payment/transfer.
• Schedule a recurring automatic payment from an outside institution: To schedule, please submit a completed Automatic Payment Authorization Form.
• By check: Simply mail your check and the payment coupon that comes with your monthly statement.
• By wire: You can arrange a wire transfer with your outside financial institution directly to your PAL (subject to terms and conditions of your outside financial institution).

After your PAL has been opened, your loan value of collateral must meet or exceed the greater of (i) your outstanding loans or (ii) a minimum loan value of collateral established by Schwab Bank (currently $100,000). You can use tools on Schwab.com to obtain information about your PAL and Pledged Account, including the loan value of collateral of the assets held in your Pledged Account and the advance rates used to determine such loan value. By using the Advance Rate Lookup tool on Schwab.com, you can also obtain information about the potential eligibility and advance rates associated with specific securities.

At any time, including if the loan value of collateral is insufficient to satisfy the minimum loan value of collateral or to support the outstanding loans, Schwab Bank may demand immediate payment of all or any portion of the outstanding obligations or require cash or securities be added to the Pledged Account.

Categories of eligible collateral generally include equities, most ETFs, American Depository Receipts (must be considered marginable by Schwab Bank and be valued at or above $3/share), cash, certificates of deposit, most mutual funds, most investment grade corporate and municipal bonds, Treasuries, and government agency bonds.

Categories of ineligible collateral generally include preferred stock or debt securities issued or sponsored by The Charles Schwab Corporation (NYSE: SCHW), control and restricted stock, options, retirement assets, annuities, and leveraged ETFs.

If you have insufficient collateral in your Pledged Account, we recommend transferring sufficient funds or eligible collateral into your Schwab Pledged Account(s) by logging into Schwab.com and visiting the Transfers & Payments page. Alternative methods to deposit cash into your Schwab Pledged Account(s) include wire transfer or mobile deposit. Other options to resolve this matter may be available.

Please call the Schwab Bank Lending Solutions team at 800-838-6573 if you have questions or need assistance with adding cash or collateral to your Schwab Pledged Account(s).

You can access your PAL funds in the following ways:

• Online transfer: Transfer funds online from your PAL to other Schwab Bank accounts on the Transfers & Payments page (under Move Money) on Schwab.com or the Schwab Mobile app.
  • Select "Online Transfer" and select "Cash Only" transfer.
  • Under "From", select the PAL for which you want to access funds.
  • Under "To", select the Schwab Bank account to which you want to transfer funds.
  • Enter the cash amount and transfer date and your funds will transfer.
• Wire transfer: For each wire transfer, please submit a completed Pledged Asset Line Wire Transfer Request and Authorization form. To view the status of your wire, log in to Schwab.com, navigate to the History tab, and select your PAL account from the drop-down list. The wire transaction will display the next day. Should you need a status sooner, please call 800-838-6573 for assistance.
• By check: You can call Schwab Bank at 800-838-6573 to request checks be sent to your address on file.

Schwab Bank's IAP program offers exclusive rate discounts for Schwab clients on PALs. PALs may be eligible for an interest rate discount of 0.25%–1.00% based on qualifying assets of $250,000 or greater. This interest rate discount cannot be combined with any other offers or rate discounts.

Qualifying assets¹ are based on Schwab Brokerage and Schwab Bank combined account balances, including:

a) Brokerage accounts in which the borrower(s) is an owner, trustee, or custodian;
b) Individually owned Traditional, Roth, and Rollover Individual Retirement Accounts (IRA) and individually or trust-owned inherited IRAs*. (Educational and Custodial IRAs are not eligible);
c) Bank accounts in which the borrower(s) is an owner or trustee: checking and savings;
d) Corporation, LLC, Partnership, and Sole Proprietorship accounts may be eligible depending on the borrower's ownership and role. (Excludes business retirement accounts such as Simple IRA, SEP IRA, and Pension Trust).

Individual, joint, revocable living trust, and irrevocable trust borrowers are eligible for IAP; organizations are not eligible for IAP.