Pros/Cons of PAL (Pledged Asset Line of Credit)

[Michael Kretch]

Hello,

I'm currently in the process of applying for a PAL.  Basically, it is a revolving line of credit secured by cash and securities in a brokerage account.  The line can be used for non-securities purchases, such as real estate.  I like the added flexibility that the line could provide while maintaining positions within a brokerage account.

I was wondering, what could the downside of an open PAL be?  I were to apply for a more conventional loan in the future, would a lender look at the PAL as a problem?

[Michael Kretch]

@Mike Barry Currently I have a PAL through Schwab which is backed by a brokerage account, I think a few other institutions offer them as well.  Interest is LIBOR + a rate spread.  So far the product has been great, I find it to be very flexible and have used it for a couple properties.  I'm still not sure how an underwriter would view the line, guessing a lot like any other line of credit.