Enjoy easy access to additional funds whenever you need them with a line of credit.
A line of credit can provide you with an ongoing and convenient way to withdraw funds whenever you need to. You can use the funds to make purchases or keep it accessible should you need it in the case of an emergency.
The flexibility of a line of credit allows you to withdraw funds up to a pre-determined limit. Interest is typically only charged on what you actually borrow and owe, not on the entire credit limit. Find out more about this method of borrowing and if it’s right for you in our guide below.
A line of credit works similar to a credit card, giving you a specified credit limit to use how you like. The main difference is the limit is usually higher, while the rates are typically lower than credit cards. You can access any amount up to your credit limit, and once you pay it back, you can re-access the money.
You won’t need to submit a credit application every time you need to make a withdrawal from your line of credit — once you’re approved, the funds are there for you to use whenever you need them. Interest is usually only charged on the funds you actually withdraw. You can even get some lines of credit that are linked to a debit card, giving you more flexibility.
|Provider||Min/Max amounts||Annual fee||APR range|
|ATB||Not listed||Not listed||Variable|
|Desjardins||Based on individual needs||No fee||Variable|
|HSBC||Not listed||Monthly fee charged if you don’t meet stated criteria||Variable|
|Meridian||Not listed||Not listed||As low as 4.45% + prime|
|NBC||$500 to $5,000+||Not listed||Variable|
|Scotiabank||Up to $20,000||No fee if payment made in full||Variable|
|TD||$5,000 – $50,000||Not listed||Variable or fixed|
Line of credit product details last verified in December 2018
Compare lines of credit vs. personal loans
One main difference is how they’re repaid.
- Personal loans give you a lump sum of money to be repaid over a fixed term, usually between one and seven years.
- Lines of credit, on the other hand, don’t come with a set repayment period.
Generally, lines of credit are great in two situations: When you can’t predict the cost of something and when you need access to cold, hard cash at the click of a button.
- Rainy day fund. Don’t have savings? A line of credit can give you quick access to money if you have an unexpected expense that is difficult to pay for with a credit card.
- Home improvements. You can’t usually pay a contractor with a credit card and it can be hard to predict how much a home improvement project will cost down to the last dollar. A line of credit can keep you prepared.
- Large ongoing projects. Since lines of credit can have higher limits than credit cards, it can be a more flexible choice. In addition, the interest rates are cheaper, keeping your costs lower.
A selection of top loans to consider
Whether you’re considering a line of credit or a personal loan, it’s important to compare your options to get the best one for you. Here are some features to keep in mind when comparing personal loans and lines of credit:
- Interest rate. In addition to comparing the interest rates, it’s important to know how the rates are applied. For lines of credit, check that the interest is being applied only to the funds you actually withdraw, not on your total balance. For personal loans, keep in mind that in some cases you may have the option of securing the loan against an asset which could result in a lower interest rate.
- Fees. Compare fees carefully as they aren’t always set out as clearly as the interest rate. While lines of credit and personal loans may advertise no annual fee, there could be monthly fees or an establishment fee.
- Loan terms. Many lines of credit and personal loans are repaid through monthly repayments. Be sure that the due dates fit your budget. If you’re applying for a personal loan, note there are different term lengths as well. Ideally, you will be able to pay off your line of credit whenever you’re able to without incurring any additional charges.
- How accessible your funds are. Consider how you will access your funds. Personal loans are typically deposited into your bank account in one lump sum, usually within a few days to a few weeks of applying. With lines of credit, you can withdraw funds as you need, but there may be a delay between the withdrawal date and when the funds appear in your account.
- You’re only charged for what you use. In most cases, you will be charged interest only on the funds you actually borrow, as opposed to the total credit limit.
- You have easy access to your funds. If your account is linked to a card, you may be able to draw the funds you need through ATMs. If not, you’ll typically have easy access to your line of credit via your online banking.
- There are flexible terms. You can use the funds how and whenever you need to, making for a very flexible financing solution. In addition, you can withdraw however much you’d like (up to your credit limit).
- Fees and charges. Be mindful that fees and charges will likely apply, such as an annual fee or a monthly service fee.
- Overspending. For those who are easily tempted, the thought of a seemingly unlimited amount of funds may cause them to make purchases that are unnecessary.
- Extra fees. Be sure to read the terms and conditions carefully for any extra fees that may not have been clear on your application.
The eligibility criteria varies between lenders, so make sure to check this carefully before submitting your application. Be prepared with the following information that’s commonly required on many line of credit and personal loan applications:
- Income. You’ll have to show proof of an ongoing steady income. Your paycheques are usually acceptable or a bank statement which shows consistent deposits from an employer.
- Info on your existing debt. You may be asked to provide information on your current debts.
- Identification. Most lenders will require government-issued ID to verify your identity. Providing your SIN number can also help identify you.
- Assets. Highly valuable property you own, plus cars, savings and investment accounts can be counted as assets.