What is a Pledged Asset Line (PAL)?


The financial industry is full of not-so-obvious tips and tools that can help you use your wealth better. One of these tools is called a Pledged Asset Line (PAL), and using a PAL effectively can help you manage your wealth more effectively.

If you have questions about Pledged Asset Lines or are interested in learning more about Chicago Partners, please contact us today!

What is a Pledged Asset Line (PAL)? 

According to Charles Schwab, a PAL is “an uncommitted, non-purpose securities-based borrowing solution that allows individuals to leverage eligible assets in their investment portfolios as collateral for a secured loan.”

In normal language, a PAL is a line of credit backed by a taxable investment portfolio. 

What does a PAL do?

A PAL can be useful in many ways, each depending on what someone’s goals and objectives are. For example, a PAL can be used to pay off credit card debt more quickly by paying off a higher-interest-rate loan (from the credit card) with a relatively lower-interest-rate loan, which effectively reduces the total amount of interest paid on the overall debt. 

Here are some other examples of how a PAL can be used:

  • Obtain a lower-interest-rate line of credit
  • Paying down higher-interest debt (example above)
  • Supplementing college education expenses
  • Paying down a mortgage
  • Paying down a car loan
  • Increasing liquidity without realizing capital gains tax

Again, depending on someone’s goals and objectives, they might choose to use a PAL for one of the above items or all of them. It’s ultimately up to them. 

An investor can access his or her PAL line with checks or wire transfers.

What doesn’t a PAL do?

While a PAL can be a helpful tool in managing interest-related finances, some areas of finance are off-limit for a PAL.

For example, an investor cannot use a PAL line to purchase more securities. This would be dangerous for the lending institution. An investor cannot transfer the PAL money to another brokerage account, and they cannot use one PAL line to pay down another PAL line. 

Who is eligible for a PAL?

A PAL is available to all investors who have at least $100,000 in investible assets and has a taxable investment account. 

Will a PAL help me and my family? 

Ultimately, it depends. It’s important to talk with a financial advisor before making any significant decisions on a PAL line. If there is a situation from the list above that resonates with you, then there may be a significant opportunity for you to intelligently use a PAL to improve your financial situation. 

Is a PAL risky?

Like other investment tools, a PAL does carry a degree of risk. Although an investor receives an extended line of credit, they will ultimately have to pay off that line of credit, like any other loan. 

While there may not be an expiration, maturity, or monthly payment requirement on the PAL, we encourage investors to at least pay the interest on the PAL monthly.

Taking that a step further, the custodian who offers you the PAL has the right to liquidate securities in your account in order to cover the PAL interest charges. Finally, if the value of the account is less than the minimum loan value, the custodian may require payment or liquidate securities to cover the deficit, which could leave the investor with unwanted tax consequences.

Our financial advisors work with clients who successfully manage and effectively use their PAL to bolster their financial situation. If you are interested in learning more about whether a PAL is right for you, we would welcome the opportunity for a conversation

1Zweig, Jason, Value Should Do Better. But When Is Anybody’s Guess, Wall Street Journal, April 27, 2018.

2JPM Guide the Markets, U.S., 2Q 2018, as of March 31, 2018, p 9.

Important Disclosure Information

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Chicago Partners Investment Group LLC (“CP”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CP. Please remember to contact CP, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CP is neither a law firm nor a certified public accounting firm and no portion of the commentary content should be construed as legal or accounting advice. A copy of the CP’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.

The financial industry is full of not-so-obvious tips and tools that can help you use your wealth better. One of these tools is called a Pledged Asset Line (PAL), and using a PAL effectively can help you manage your wealth more effectively.

If you have questions about Pledged Asset Lines or are interested in learning more about Chicago Partners, please contact us today!

What is a Pledged Asset Line (PAL)? 

According to Charles Schwab, a PAL is “an uncommitted, non-purpose securities-based borrowing solution that allows individuals to leverage eligible assets in their investment portfolios as collateral for a secured loan.”

In normal language, a PAL is a line of credit backed by a taxable investment portfolio. 

What does a PAL do?

A PAL can be useful in many ways, each depending on what someone’s goals and objectives are. For example, a PAL can be used to pay off credit card debt more quickly by paying off a higher-interest-rate loan (from the credit card) with a relatively lower-interest-rate loan, which effectively reduces the total amount of interest paid on the overall debt. 

Here are some other examples of how a PAL can be used:

  • Obtain a lower-interest-rate line of credit
  • Paying down higher-interest debt (example above)
  • Supplementing college education expenses
  • Paying down a mortgage
  • Paying down a car loan
  • Increasing liquidity without realizing capital gains tax

Again, depending on someone’s goals and objectives, they might choose to use a PAL for one of the above items or all of them. It’s ultimately up to them. 

An investor can access his or her PAL line with checks or wire transfers.

What doesn’t a PAL do?

While a PAL can be a helpful tool in managing interest-related finances, some areas of finance are off-limit for a PAL.

For example, an investor cannot use a PAL line to purchase more securities. This would be dangerous for the lending institution. An investor cannot transfer the PAL money to another brokerage account, and they cannot use one PAL line to pay down another PAL line. 

Who is eligible for a PAL?

A PAL is available to all investors who have at least $100,000 in investible assets and has a taxable investment account. 

Will a PAL help me and my family? 

Ultimately, it depends. It’s important to talk with a financial advisor before making any significant decisions on a PAL line. If there is a situation from the list above that resonates with you, then there may be a significant opportunity for you to intelligently use a PAL to improve your financial situation. 

Is a PAL risky?

Like other investment tools, a PAL does carry a degree of risk. Although an investor receives an extended line of credit, they will ultimately have to pay off that line of credit, like any other loan. 

While there may not be an expiration, maturity, or monthly payment requirement on the PAL, we encourage investors to at least pay the interest on the PAL monthly.

Taking that a step further, the custodian who offers you the PAL has the right to liquidate securities in your account in order to cover the PAL interest charges. Finally, if the value of the account is less than the minimum loan value, the custodian may require payment or liquidate securities to cover the deficit, which could leave the investor with unwanted tax consequences.

Our financial advisors work with clients who successfully manage and effectively use their PAL to bolster their financial situation. If you are interested in learning more about whether a PAL is right for you, we would welcome the opportunity for a conversation. 


Important Disclosure Information

Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Chicago Partners Investment Group LLC (“CP”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CP. Please remember to contact CP, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CP is neither a law firm nor a certified public accounting firm and no portion of the commentary content should be construed as legal or accounting advice. A copy of the CP’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request.