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Charles Schwab loans

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Charles Schwab

Charles Schwab offers several secured loan options ideal for homeowners or investors looking to unlock borrowing power through their home or investments.

What types of loans does Charles Schwab offer?

You can choose between secured lines of credit and mortgages when borrowing from Charles Schwab:

  • Margin loan. Borrow as little as $1,000 to over $500,000 by using your brokerage account as collateral with this secured line of credit.
  • Pledged Asset Line (PAL). Use your liquid assets to secure this revolving line of credit. Credit limits start at $100,000 and go all the way up to $20,000,000.
  • Mortgage. Have your pick of jumbo loans, ARMs and fixed-rate mortgages with special discounts for Charles Schwab investment customers. Plus, its Mortgage First program allows you to get preapproved before you even start looking at homes.
  • Home equity line of credit (HELOC). Get access to a line of credit secured by the equity in your home for 10 years, followed by a 20-year repayment period.

Why doesn’t Charles Schwab offer more loan options?

Because Charles Schwab is largely focused on investments, other lending products like car loans, student loans, business loans and personal loans are off the table. However, there are several alternatives available if Charles Schwab doesn’t offer what you need.

Why should I consider taking out a loan with Charles Schwab?

Despite its limited offerings, borrowing with Charles Schwab does have a few benefits.

  • Increases your borrowing power. With a margin loan or PAL, you can borrow up to 75% of your assets’ value. This means you won’t have to liquidate your securities and face tax consequences when you’re looking to add to your portfolio.
  • Access to a team of investment specialists. When you borrow from Charles Schwab, you’ll have access to a team of specialists that can offer advice on how to make the most of your loan.
  • Flexible lines of credit. Aside from its mortgage option, all of Charles Schwab’s loans are technically lines of credit. You won’t pay interest on the money you don’t use, and you may be able to reborrow from the same line once you’ve paid back previous draws.

Where does Charles Schwab fall short?

While Charles Schwab allows you to increase your borrowing power without selling off your securities, it’s not without its drawbacks.

  • Must have a robust investment portfolio. Although a margin loan allows you to borrow with just $2,000 in cash or marginable securities, the best rates are reserved for those who are able to borrow larger amounts over $250,000.
  • Only offers secured loans. To borrow with Charles Schwab, you need to be willing to put up some collateral. This puts most of the risk on you, which may not be appealing if you don’t want to risk losing your home or investments.
  • Limited loan options. Charles Schwab only offers four types of loans — and even its credit card options are slim. If you want variety in your borrowing power, it may not be the right bank for you.

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How much will it cost me to borrow with Charles Schwab?

While there are no monthly or annual fees that come with its secured personal line of credit options, you still have to pay interest on the amount you draw.

For margin loans, the APR can range anywhere from 8.07% to 9.82%, with larger loan amounts earning a lower rate. And for PALs, your APR will vary based on the one-month LIBOR index and an interest rate spread, which is determined by your available credit limit. PAL borrowers may also be charged a standard trading commission as well as a late fee if you don’t have enough funds left in your credit line to make your monthly repayments.

You may be required to maintain a certain amount of equity in your account or meet other minimum requirements while you’re borrowing on margin or with a PAL. Check with Charles Schwab and go over your contract carefully to make sure you understand the full scope of fees you might face.

What do borrowers say about Charles Schwab?

Charles Schwab isn’t accredited with the Better Business Bureau (BBB) and receives a B+ rating as of May 2019. While it doesn’t have many reviews on its BBB page, what’s there isn’t good. Many customers complained of account freezes and closures without any explanation, while others had difficulties taking out a loan. Of the 14 customers who left reviews, all gave the bank a 1-star rating.

Are Charles Schwab loans safe?

While it’s safe to use Charles Schwab’s website — it has a standard privacy policy and up-to-date encryption to keep your personal information safe online — there’s a high degree of risk that comes with some of its loans. Before you dive into borrowing on margin, using your home as collateral or opening a Pledged Asset Line, you may want to speak with a financial adviser to learn more about how a secured loan can affect your investment assets.

How to apply for a loan with Charles Schwab

The application process varies based on the type of loan you want to take out.

For its Pledged Asset Line and margin loan, you’ll likely need to visit a branch to get things set up. You can request more information by calling Charles Schwab or using its online chat service.

For its home loan options, you can apply online or at your local branch.

Eligibility requirements

The specific eligibility requirements vary by loan, though you’ll likely need to meet a few basic criteria at the very least:

  • Charles Schwab account
  • Good to excellent credit
  • Regular source of income

More about Charles Schwab

Founded in 1971, Charles Schwab Bank is owned by the Charles Schwab Corporation and is one of the largest banks in the US. It seeks to put its customers first by offering multiple ways to manage wealth and investments. It has nearly 12 million brokerage accounts and its clients have around $3.59 trillion in assets.

Bottom line

Charles Schwab’s secured loans may be appealing if you’ve spent time building your investment portfolio and are looking for ways to increase your borrowing power.

Not sure it’s right for you? See how it compares to other big names in lending with our guide to personal loans from banks.

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