Schwab Bank is offering a Pledged Asset Line of Credit.
A Pledged Asset Line of Credit (PAL) is a line of credit that allows you to borrow against the non-retirement assets in your portfolio without having to liquidate your investments. Initial loans must be at least $70,000. Retirement assets are not eligible. Most securities are eligible, including most mutual funds, exchange-traded funds (ETFs), CDs, cash; corporate, Treasury, municipal, and government agency bonds, as well as marginable equity securities valued at or above $3 per share.
A loan can be used for many purposes, but one very common use is to provide a short-term loan to purchasing property after which your original property will be sold and the loan paid off. Loans may not be used to purchase securities, pay down margin loans, or be deposited into any brokerage account.
Your line of credit is determined by the amount of assets you put into the account. The line of credit is determined by the size of the account divided by 1.43. Alternately, the value of the account must be at least 1.43 times the line of credit you want.
There are several restrictions on PAL accounts. When an account is turned into a PAL account, all non-repeating MoneyLinks are taken off of the account, check writing is cancelled, bill pay is removed, and debit cards are cancelled. All margin capability is removed from the account. The only way to get money out of a PAL account is either to wire transfer out of the account or journal the money to another Schwab taxable account. For this reason, we recommend opening a second taxable account to be made into a PAL account rather than converting an existing taxable account into a PAL account.
The interest rate for a PAL account is computed as The Secured Overnight Financing Rate (SOFR) plus the line of credit rate minus the Interest rate discount.
The SOFR is a variable rate, as of 3/16/2026 at 3.65%. According the Federal Reserve Bank of New York , “The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.”
Onto the SOFR rate Schwab adds an annual percentage rate depending on the line of credit available, starting at 4.40% for a line of credit over $100,000 and going down to an added rate of 2.40% for a line of credit over $2,500,000.
And Schwab also offers a discount which is dependent on the amount of qualifying assets put into the PAL account, starting at a discount of 0.25% for assets over $250,000 and going up to a discount of 1.00% for assets of at least $10,000,000.
All told, rates will currently vary between 8.05% and 5.05% based on qualifying assets put into the PAL account which then determines the line of credit available. A loan may be adjusted as the value of the pledged assets goes up or down, and a loan repayment may be demanded by Schwab Bank at any time. If a demand is not addressed, the pledged securities may be immediately liquidated without further notice to you, which may result in tax consequences. There are no fees to apply for the line of credit, and there are no account opening or maintenance fees on the Pledged account. Entering into a Pledged Asset Line and pledging securities as collateral involves a high degree of risk. These and other warnings appear on the Schwab PAL website.
Here is a chart showing how those rate can vary.
| Amount in PAL Account | Line of Credit | Total Interest Rate = | (SOFR Rate | + Interest Rate | – Discount) |
| $143,000 | $100,000 | 8.05% | 3.65% | 4.40% | 0.00% |
| $250,000 | $174,825 | 7.80% | 3.65% | 4.40% | 0.25% |
| $357,500 | $250,000 | 7.30% | 3.65% | 3.90% | 0.25% |
| $715,000 | $500,000 | 6.80% | 3.65% | 3.40% | 0.25% |
| $1,000,000 | $699,301 | 6.55% | 3.65% | 3.40% | 0.50% |
| $1,430,000 | $1,000,000 | 6.05% | 3.65% | 2.90% | 0.50% |
| $3,575,000 | $2,500,000 | 5.55% | 3.65% | 2.40% | 0.50% |
| $5,000,000 | $3,496,503 | 5.30% | 3.65% | 2.40% | 0.75% |
| $10,000,000 | $6,993,007 | 5.05% | 3.65% | 2.40% | 1.00% |
Before setting up a PAL account, we recommend that you consult with a fee-only fiduciary CERTIFIED FINANCIAL PLANNER™ that engages in comprehensive financial planning in order to receive more objective advice. Finding such advisors can be difficult, but all National Association of Personal Financial Advisors (NAPFA) qualify. If you have any doubt about your financial advisor, we recommend that you ask them these ten questions.
If you have questions about Schwab Bank’s Pledged Asset Line, Schwab recommends calling 888-725-3630 to speak with a Regional Banking Manager about a Pledged Asset Line.
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