Securities Backed Line of Credit (Pledged Asset Line)

[Kyle Collette]

Hey BP Community,

Question for you all: Looking to open a Line of Credit (called a Pledged Asset Line by Charles Schwab) against my brokerage investment accounts. Does anyone have any experience with this? I opened a HELOC early last year and was wondering how the process is different.

I spoke with Charles Schwab yesterday and got an overall view, but wanted to check to see if anyone has had any experience (positive or negative) doing this.

The plan is to use the PAL to make "cash" purchases and then immediately refinance (using delayed financing).

Any advice/insight is appreciated!

[Mark B.]

@Michael McKay Very cool, I'm curious to hear more about this. I actually posted about this the other day and didn't get much of a response. Figured it was more of a niche method than most of the usual ones. But I'm in a similar spot to you that I have a Morgan Stanley 401K/IRA account with significant investment in it and I was hoping to leverage that to use for BRRRR purposes some time in the near future. Though someone when I posted said that unlike a HELOC or HML you would not be able to write off the interest paid on the loan since the collateral guaranteeing the loan is not a physical property. I haven't checked with my CPA to confirm or deny but I've seen some conjecture on that point but more than likely it seems like it's true and that would be one detriment to using this method versus the others. Would love to hear your perspective of how you set it up, how long it took, the logic behind what percentage of your holdings they'll offer you as a line, etc. 50% was lower than I'd read about, it seemed more in line with 60-75% depending on the types of holdings I believe. Let me know how the process has gone so far for you and if there are any snags to look out for. Totally agree on giving yourself significant pad to prevent the loan getting called should a significant drop happen. Any notes or perspective would be much appreciative. Thanks!