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 if you need it in case of an emergency.
The flexibility of a line of credit allows you to withdraw funds up to a pre-determined limit. Line of credit interest rates are only charged on what you actually borrow, 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.
What is the average interest rate for a line of credit in Canada?
Based on the latest information available from the Bank of Canada, the average interest rate is 4.52% for a secured personal line of credit and 8.13% for an unsecured personal line of credit. Your line of credit rate will depend on your credit score and other personal factors.
Explore line of credit interest rates from 3 different types of lenders below:
Bank line of credit interest rates in Canada
All major banks in Canada offer lines of credit like personal unsecured lines of credit, home equity secured lines of credit (HELOCs) and sometimes investment or student credit lines. Bank lines of credit tend to come with variable interest rates based on the bank’s prime rate.
|LOC provider||LOC interest rates & fees||Loan amount|
Information in this table was last verified on November 7, 2022
Bank personal lines of credit
Most big banks offer personal lines of credit – either unsecured or secured – including CIBC, TD, RBC, Tangerine and Scotiabank. Because banks carry a higher risk with unsecured lines of credit, they often pass on some of that risk to the borrower by charging higher interest rates.
- CIBC Prime Rate: 5.95%
- TD Prime Rate: 5.950%
- RBC Prime Rate: 5.950%
- Scotiabank Prime Rate 5.950%
- BMO Prime Rate: 5.950 %
- Tangerine Prime Rate: 5.95%
The amount you can borrow on an unsecured line of credit from a bank usually starts at $5,000 and caps at $50,000. That said, some banks offer different line of credit amounts. Scotiabank offers a higher maximum borrowing amount than other big banks at $75,000, while BMO offers a lower-than-standard personal line of credit cap at $25,000. Banks like RBC and Tangerine don’t specify a maximum borrowing amount.
Bank home equity secured lines of credit
It’s far less risky for banks to offer a home equity secured line of credit (HELOC), because the line of credit is secured with your home. Because it’s less risky, HELOCs tend to come with lower variable interest rates compared to unsecured lines of credit.
In Canada, you can only borrow up to 65% of the value of your home if you get a standalone HELOC. Alternatively, if you were to get a HELOC that is tied to your mortgage, the total of your HELOC plus any outstanding mortgage you have cannot equal more than 80% of your home’s value.
The amount banks in Canada are willing to lend through a HELOC varies quite a bit from bank to bank. While some banks don’t specify minimum HELOC amounts, many offer minimum HELOCs starting at $5,000, while Scotiabank starts at $10,000 and Tangerine at $50,000.
The maximum HELOC amount banks will lend can range from $3,000,000 from Tangerine or $1,500,000 from Scotiabank. Other banks don’t specify a HELOC cap. Keep in mind that banks in Canada cannot offer a HELOC worth more than 65% to 80% of your home’s value depending on the type of HELOC product.
Bank investment lines of credit
Some banks offer investment secured lines of credit, where you secure the loan with your investment assets. Canadian banks that offer investment secured lines of credit include TD and RBC.
The amount you can borrow is typically dependent on both the amount and type of your investments. You can usually borrow up to a set percentage of the value of your investments assets, typically anywhere from 50% to 65% up to 100% of its value. TD bank further caps its investment secured line of credit at $200,000.
Like HELOCs, the line of credit interest rates on these investment secured option tend to be lower than unsecured options.
Bank student line of credit
College and university students can potentially qualify for a student line of credit – a type of student loan typically offered by banks like Scotiabank, TD and CIBC. The benefit of student lines of credit is lower rates compared to personal loans, a flexible repayment schedule based on your graduation schedule and interest-only payments while you’re in school.
The amount you’ll be able to borrow will depend on factors like your field of study and whether or not you have a cosigner. For example, TD offers student lines of credit up to $80,000 for undergraduate studies, up to $150,000 for graduate programs and $350,00o for professional programs.
The CIBC Education Line of Credit comes with a maximum program amount of $60,000, that can be divided into $15,000 yearly limits for a full-time undergraduate student.
Private lender line of credit interest rates in Canada
Private lenders that offer lines of credit are typically online financial institutions with more more lenient eligibility requirements than banks and credit unions, and will often allow bad credit borrowers to apply. Because of the added rick, line of credit interest rates offered by private, online lenders tend to be on the higher side.
Information in this table was last verified on November 7, 2022
Types of lines of credit offered by private lenders in Canada
Private lenders tend to offer a simplified selection of lines of credit compared to banks and credit unions. So you won’t likely find investment secured or student lines of credit offerings from online lenders. However, they do tend to offer both unsecured lines of credit and HELOC options. The line of credit interest rates offered by private lenders on unsecured loans can be as high as 47%, while HELOC rates can range from 2.5% to 5%.
The maximum amount you can borrow on a line of credit from online lenders can very quite a bit depending on the lender, but can range between $10,000 from Cash Money to $50,000 from LoanConnect. Alternatively, the MogoMini line of credit option is designed for smaller expenses and only offers up to $3,500.
Credit union line of credit interest rates in Canada
Credit unions in Canada tend to offer the same line of credit options as banks, including personal and home equity secured lines of credit.
|LOC provider||LOC interest rates & fees||Loan amount|
Information in this table was last verified on November 7, 2022
What is a personal line of credit and how does it work?
Sometimes also referred to as a “credit line,” a line of credit is an open, revolving type of loan where you can access any amount up to your credit limit, and once you pay it back, you can re-access the money. A personal line of credit works similar to a credit card, with the main differences typically being a higher credit limit and lower rates compared to a credit card.
Interest is usually only charged on the funds you actually withdraw. 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. You can even get some lines of credit that are linked to a debit card, giving you more flexibility.
Line of credit interest rates in Canada are typically variable. Variable interest rates are typically described as “prime + increment%.” The increment percentage will depend on the type of line of credit you get and on your personal financial factors like your credit score, income and debt load.
Variable interest rates are tied to the Bank of Canada prime rate, which can be adjusted several times a year. That means that your line of credit interest rate, and subsequent repayment amount, could change over time.
You can see how the average interest rates in Canada on secured and unsecured lines of credit have changed since January 2013 in the graph below.
How do you calculate line of credit interest rates in Canada?
In order to calculate how much your rate will be, you simply have to add the bank’s prime rate to the increment%.
So, for example, if your rate is described as “prime + 7%” you first need to find the bank’s prime rate (outlined above). Let’s say the bank’s prime rate is 5.95%, you’ll then add 7% to that. In this example, your interest rate would be 12.95%. If the prime rate goes up by 0.25% in a few months from 5.95% to 6.20%, your interest rate would then change to 13.20%.
How can I get a line of credit with bad credit in Canada?
If you’re looking for a line of credit with bad credit in Canada, you can potentially qualify to get one from online lenders specialized in working with bad credit borrowers. Some legitimate bad credit online lenders in Canada who offer line of credit products include Mogo and Cash Money. Another option is to apply for a bad credit line of credit with a lending broker – like Loans Canada or LoanConnect – who will then be able to match you with a number of lenders you qualify with.
Watch out for
- High interest rates. If you have bad credit, line of credit interest rates for bad credit can be as high as 46.96%. A line of credit is convenient because its open term allows you to make payments any time, but if the rate is high, interest can quickly add up the more you wait to pay off the balance.
- Overspending. Only borrow what you absolutely need even if you’re approved for a higher amount.
Alternatives to a personal line of credit when you have bad credit
If you’re on the fence about whether a personal line of credit is right for you, consider alternatives:
- Unsecured personal loans. Apply for a fixed loan amount and pay it off in installments. APRs for bad credit personal loans range between 18% and 46.96%. Learn about the best bad credit personal loans in Canada.
- Credit card cash advance. The APR of a credit card cash advance is around 23% plus a 5% fee of what you borrow.
Secured line of credit vs. unsecured
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 lower line of credit interest rates 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 what you borrow and the approval process is quicker.
Some of the main differences are how they’re typically used and how they’re repaid:
|Personal loan||Line of credit|
|Often used for a big, one-time purchase||Often used for ongoing purchases|
|Repaid over a fixed term, usually between 1 and 7 years||Doesn’t come with a set repayment period|
|Received as one lump sum||Funds are available and accessed as needed|
Credit card vs. line of credit: What’s the difference?
One main difference is interest rates. Line of credit interest rates in Canada are usually lower than credit card interest rates. 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 major home renovations or emergencies. And although some lines of credit come with a card linked to the credit account, it’s more common that you won’t get a card and instead will need to transfer money from your line of credit to your chequing account to get access to the funds.
Generally, lines of credit are great in two situations: When you can’t predict the cost of something and when you need access to money 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, line of credit interest rates are cheaper, keeping your costs lower.
How much can I borrow on a line of credit in Canada?
Most lenders offer lines of credit from $5,000 and up to between $25,000 and $50,000 for unsecured lines of credit. The amount you borrow on a secured line of credit is typically maxed out at a percentage of the value of the collateral. However, the exact amount you qualify for will vary depending on your personal finances, credit profile, the type of credit line 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.
Where can I get a line of credit in Canada?
There are many options for where to get a line of credit in Canada including banks (like RBC, Tangerine and Scotiabank), credit unions (like Desjardins and Vancity) or online lenders (like Mogo and Cash Money). Banks and credit unions tend to offer lower interest rates than online lenders, but only to good or excellent credit borrowers. Online line of credit lenders tend to be a better fit for bad credit borrowers who can’t qualify with other lenders.
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 for lines of credit 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 line of credit 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 line of credit 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.
What is line of credit insurance?
Banks often offer line of credit insurance as an additional monthly cost. Different types of line of credit insurance may include disability insurance, life insurance, critical illness insurance or job loss coverage. Generally, these types of insurance allow you to stop paying on your line of credit, have a portion of the line of credit repaid or have your line of credit repayments temporarily suspended in the event of illness, injury or death. Line of credit insurance is typically charged monthly and can cost around $0.25 – $10 per $100 or $1,000 borrowed.
Do I need line of credit insurance?
Deciding whether or not its worth getting line of credit insurance will depend on your lifestyle and financial priorities. It likely won’t make sense to buy line of credit life insurance if you already have a life insurance policy where the pay out will be enough to cover your line of credit debt as well as other expenses. Your health insurance coverage may also come with a monthly payout in the event of illness or critical injury. If you don’t already have coverage through independent insurance, consider getting line of credit insurance if you know you won’t have the financial resources to cover the payments should the unexpected happen.
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