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Compare lines of credit
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.
Compare personal lines of credit
Other lenders who offer personal lines of credit
If you have good to excellent credit, below is a breakdown of lines of credit provided by major financial institutions in Canada, including credit limits, fees and line of credit interest rates.
|Provider||Min/Max amounts||Fees||Line of credit types available (not counting home equity)||APR range|
|ATB||$5,000-$50,000||No fee||Secured or unsecured||Variable, based on ATB prime rate (2.45%)|
|BMO||$5,000-$25,000||Not listed||Secured or unsecured||Variable, based on BMO prime rate (2.45%)|
|CIBC||$5,000+||Not listed||Secured or unsecured||Variable, based on CIBC prime rate (2.45%)|
|Desjardins||Based on individual needs||No administration fees||Not specified||Variable, based on Desjardins prime rate (2.45%). As of April 8, 2021, 8.95% for $500-$4,999 and 8.45% for $5,000 to $25,000.|
|HSBC||Not listed||Monthly fee charged if you don’t meet stated eligibility criteria||Not specified||Variable, based on HSBC prime rate (2.45%)|
|Meridian||Not listed||Not listed||Secured or unsecured||Variable, based on prime. As of April 2021, 3.50% for a secured LOC. For an unsecured LOC, rate depends on your credit history and capacity to repay the loan.|
|National Bank||Personal Flex Line: $5,000+|
Integrated Line of Credit: $500-$5,000
|Personal Flex Line: Not listed|
Integrated Line of Credit: No management fees
|Not specified||Personal Flex Line: Variable based on your credit history|
Integrated Line of Credit: Prime rate (2.45%) + 7%. As of April 8, 2021, rate is 9.45%.
|Scotiabank||$5,000-$75,000||No annual fee||Not specified||Prime rate (2.45%) + an adjustment factor|
|RBC||$5,000+||No annual fee||Secured (your investments as collateral) or unsecured||Variable, based on RBC prime rate (2.45%)|
|TD||$5,000 – $50,000||No fee||Secured (your investments as collateral) or unsecured||Secured: Variable, based on prime rate (2.45%)|
Unsecured: Variable, based on prime rate (2.45%) or fixed, based on personal factors
Line of credit product details last verified in April 2021
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.
Secured vs. unsecured lines of credit
When you open a line of credit, you’ll need to choose between one of two options:
- Secured line of credit. If you want to borrow a larger sum of money, some lenders require you to back your line of credit with collateral, typically a savings account, property or Guaranteed Investment Certificate (GIC). This often results in a lower interest rate since it poses less risk to the lender. The lender can take possession of the collateral if you aren’t able to pay back your line.
- Unsecured line of credit. Like unsecured personal loans, you don’t need any collateral to back an unsecured line of credit. While these typically come with higher interest rates, you don’t risk losing any property or savings if you’re unable to repay your loan and the approval process is quicker.
One main difference is how they’re typically used.
- A personal loan is often used for a big, one-time purchase.
- A line of credit is often used for ongoing purchases.
Another difference is how they’re repaid.
- A personal loan gives you a lump sum of money to be repaid over a fixed term, usually between one and seven years.
- A line of credit, on the other hand, doesn’t come with a set repayment period.
How is a line of credit different from a credit card?
One main difference is interest rates. The interest rate on a line of credit is typically lower than the interest rate on a credit card. For example, CIBC’s Select Visa Credit Card, which is advertised as a low interest card, has an interest rate of 13.99% as of April 2021. National Bank’s Integrated Line of Credit has a rate of 9.45% as of April 8, 2021.
Another main difference is how they’re used. A credit card is typically used for small everyday expenses, while a line of credit is typically used for big expenses such as a car purchase or emergencies.
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.
How much can I borrow?
Most lenders offer lines of credit from $5,000 and up. However, the exact amount you qualify for will vary depending on your personal finances, credit profile, the kind of line of credit (secured vs. unsecured) and the lender you choose. Your history with the lender may also impact how much you’re able to borrow.
Once your credit limit is approved — the maximum amount that you’re able to borrow overall — you can start drawing from your line.
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.
How can I apply for a personal line of credit?
You can apply for a personal line of credit online, by phone or in person. The exact application process will vary by lender, but you’ll generally need to provide information about yourself and your finances. To qualify, you’ll typically need to have good credit, a low debt-to-income ratio and a regular source of income. Lenders will typically ask for a government-issued ID and bank statements, and some might require you to provide pay stubs or information about your employment.
When you’re ready to apply, you can compare lenders that offer lines of credit to learn more about their specific requirements.
What information will my lender ask for?
Eligibility criteria varies between lenders, but in general, you will need to provide the following information:
- Proof of income. You’ll have to show proof of an ongoing steady income. Your pay stubs are usually acceptable or a bank statement which shows consistent deposits from an employer.
- Existing debt. You may be asked to provide information on your current debts, including your mortgage or housing payments.
- Identification. Most lenders will require government-issued ID to verify your identity.
- Assets. Lenders typically use savings and investment accounts as collateral for high-dollar lines of credit.
How long does it take to get a personal line of credit?
It typically takes only a few minutes to complete an application for a personal line of credit. Processing times vary by lender: banks may take 1 to 2 weeks to reach a decision, while online lenders may have an answer for you in less than an hour.
If you’re approved, you may be able to start drawing from your line of credit immediately. Like the application process itself, the time it takes to receive your funds will vary.
How do repayments work?
Lines of credit can have two phases:
- Draw period. This is the period of time when you can draw from your credit line. Some lenders offer an open draw period with no term limit, allowing you to use the funds again without needing to reapply as long as you have paid any or all of your balance. If there is a term limit, you may be required to make minimum monthly payments that cover interest that’s accrued during a “grace period”, as well as pay an annual maintenance fee. You can choose to pay more than the minimum, but it won’t be necessary until the repayment period begins after the “grace period”.
- Repayment period. When the repayment period sets in, you can’t draw any more funds from your line of credit. It will convert how much you’ve borrowed to a term loan, and you’ll need to make regular monthly payments that cover both interest and the principal. The length of the repayment period will depend on the terms in your agreement with the lender.
What happens if I can’t repay my line of credit?
If you aren’t able to make a payment, reach out to your lender to discuss your options as soon as possible. You may be able to make small minimum payments toward your debt or get on an alternative payment schedule.
Defaulting on your line of credit will cause your credit score to take a hit and could lead to multiple fees. If you secured your credit line with collateral, your lender can confiscate those funds to cover your debt.
Can I pay off a personal line of credit early?
In most cases, you can make extra repayments during the draw period and pay your line of credit off early. Since many lines of credit are revolving, you may be able to borrow those funds again once you’ve repaid them.
When it comes to making extra repayments during the repayment period, your lender may charge a prepayment penalty or other fee to make up for lost interest but some lenders allow extra payments without any fees. Check your loan agreement for specific details.
- 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.
- Interest rates. If interest rates go up, you may face difficulty paying back your line of credit.
- 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.
Alternatives to a personal line of credit
If you’re on the fence about whether a personal line of credit is right for you, there are a few similar options you might want to consider instead:
- Home Equity Line of Credits (HELOCs). Because home equity line of credits are secured by your property, you can typically borrow much more than with a personal line of credit. This can be useful for large projects or expenses like home renovations and college expenses.
- Personal loans. Personal loans are best if you need to cover a large one-time expense or purchase. You’ll receive your funds as a lump sum and pay it back plus interest with monthly repayments over the agreed repayment period. You can compare the differences between personal loans and lines of credits here.
- Credit cards. Credit cards have higher interest rates, but they’re much more accessible than lines of credit. And with a wide variety of options out there, a credit card can help cover smaller expenses as they crop up.
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