The type of credit you choose will depend on what you need the money for and how much you’re looking for. If you’re looking for a large sum you can’t repay immediately, an unsecured personal line of credit or loan is a good option.
If you’re looking for a more flexible way to borrow money, then a line of credit is the way to go. That said, you do have to do some research and find the right line of credit for you. There are plenty of great options out there—some with better interest rates than others.
Lines of Credit and How They Work
Lines of credit are a great way to access funds flexibly. The easiest way to describe a line of credit is that it’s almost like a combination of a personal loan and a credit card. It’s a form of revolving credit that you can access as long as you have a room available. You have access to potentially lower interest rates, as you would with a personal loan, but you can use the line of credit repeatedly.
With lines of credit, using only 30% to 35% of your credit limit is ideal. While you can use more, doing so can negatively impact your credit score. The lower you’re able to keep the balance, the better off you are.
What are the Minimum Payments on Lines of Credit?
One upside of a line of credit is that the minimum payments are extremely low and often consist solely of interest. Because of that, though, you aren’t actually paying down the balance at all. You are, however, able to make lump-sum principal payments whenever you like, directly from your bank account. That said, the higher your balance, the more your credit falls.
To figure out how much you owe, you should be receiving an updated balance statement every month. You should also be able to check the balance through your online banking platform.
Different Kinds of Lines of Credit
Essentially, there are three different types of lines of credit: Secured Lines of Credit, Unsecured Lines of Credit and Student Lines of Credit.
Secured LOCs
Secured lines of credit are loans backed by collateral, such as a car or a house. This means that if you default on the line-of-credit payments, your asset can be seized. The most common example of this is a HELOC, or Home Equity Line of Credit. This is when you borrow against the equity in your home as a line of credit. These forms of lines of credit have lower interest rates. However, they are riskier because an asset is attached. That said, because there is an asset attached, they’re the easiest lines of credit to get approved for.
Unsecured LOCs
Unsecured lines of credit have slightly higher interest rates, but you don’t risk losing an asset if you default on the payments. That said, they are harder to get, and you do need to have a decent interest rate to get approval, especially if you’re looking for a large sum of money.
Student LOCs
Student lines of credit have lower interest rates than a traditional line of credit. They’re meant for students taking post-secondary education to help with tuition and other related expenses. With these types of lines of credit, you’re only required to pay interest on the outstanding balance until you’ve completed school. Once you’ve completed school, there’s a 6-12-month grace period before you need to start paying interest and principal.
Interest Rates on Lines of Credit in Canada
Since prime rates have been steadily increasing in 2023, line-of-credit interest rates have risen slightly. The average rate sits between 8% and 10%. Those with secured personal lines of credit can get lower rates of 6%-7%, while unsecured lines are usually closer to 10%. That said, rates have started to decrease in 2024, so they could drop below 8%.
Best Bank Line of Credits 2026
If you’ve decided to get a line of credit, you don’t have to get it with your primary financial institution unless it’s the best rate. There are plenty of other financial institutions that offer lines of credit with great rates. Here are some of Canada’s major banks and their line of credit options.
Tangerine
Tangerine is an online financial institution that offers some great rates on lines of credit. Like other lines of credit, interest rates are variable, so it’s difficult to determine the exact rate over the term. That said, Tangerine’s prime rate is 4.45%, and with their unsecured line of credit advertised as 2% plus prime, the starting rate right now would be 6.45%. The HELOC rate as of now is 5.45%, but it will fluctuate.
As a bonus, there are no annual fees with Tangerine accounts, so all you pay is the interest and the principal. Because Tangerine is strictly online, you don’t have to go into a branch to get a line of credit. You can apply online and start using the funds as soon as your application is approved. They offer flexible repayment options and 24/7 access to the funds.
Royal Bank of Canada
RBC is another financial institution that offers competitive rates on lines of credit. Some key features that they offer with their Royal Credit Line are:
- No annual fees
- Low interest rates
- Flexible repayment options
- The ability to close your account and reduce limits online
- Credit alerts when your available limit hits $100
- Loan Insurance: Life, Disability or Critical Illness
RBC also offers secured LOCs. With their secured Home Equity LOCs, the minimum available credit limit is $5,000, with maximum amounts up to 65% of your home’s value minus what is still owed. The minimum limit on unsecured LOCs is also $5,000. The rate you’re approved for depends on your financial situation, credit score and the current prime rate, which is 4.45%.
Their website also has a loan calculator. You just enter the total amount and the monthly interest rate, and you’ll get an estimated monthly payment.
TD Canada Trust
TD Canada Trust offers a variety of LOC options, including:
- Personal lines of credit
- Student lines of credit
- Investment-secured lines of credit
- TD Home Equity Flexline
Which LOC you get approved for will depend on your financial situation, credit score, and the reason you would like an LOC. The current prime rate at TD is 6.95%, so each LOC’s rate will fluctuate with prime. However, TD also offers a fixed-rate option you can choose instead.
You can apply online, in person or over the phone with TD. The approval amounts are based on your individual situation, but they range from $5,000 to $50,000.
You can access your TD LOC through the app or online banking. However, your current interest rate will only show when you use online banking. You can also set up your LOC to withdraw funds directly from your TD access card.
Scotiabank
While Scotiabank LOCs are similar to those at other banks or credit unions, one unique feature they offer is a Visa access card for your line of credit. This allows you to withdraw money without transferring funds. Other features included are:
- No annual fees
- Credit limits from $5,000 to $75,000
- Flexible repayment options
- Access to the app
- Optional line of credit insurance and critical illness insurance
- 25% rental cars at some Avis or Budget locations with the access card
To apply for a personal line of credit, you’ll need a few different documents. You’ll need at least one of the following:
- Passport
- Driver’s License
- Valid government-issued ID
You’re also going to need a letter of employment and pay stubs. If you’re self-employed, you’ll need to provide proof, such as a notice of assessment or a current assessment on your MY ACCOUNT.
The different lines of credit that Scotiabank offers are:
- ScotiaLine Personal Line of Credit
- ScotiaLine Personal Line of Credit (Real Estate Secured)
- ScotiaLine Personal Line of Credit for Students
- Scotia RSP Catch-Up Line of Credit
The current prime rate on Scotiabank lines of credit is 4.45%.
Bank of Montreal
BMO also offers some good lines of credit at great rates. There are a few to choose from, and you can get a preferred rate when you secure an asset for your LOC. Here are the different LOC options available.
- Personal LOC:
- Minimum $2,000 credit limit
- Minimum monthly payments of $50 or 2% of the balance (whichever is greater)
- Apply online if you bank with BMO
- Homeowner’s LOC
- Minimum $5,000 credit limit
- Interest-only payments required
- Online access with a BMO chequing account
- Homeowners’s Deadline
- Minimum $5,000 credit limit
- Access up to 80% of your home’s value
- Access to more as you pay your mortgage
If you choose to apply online, you can get approved for up to $25,000 for a personal line of credit. For more money or a different LOC, you’ll have to book an appointment and go into the branch.
All BMO lines of credit have variable interest rates. The interest is calculated daily and posted monthly as your minimum payment. The current prime rate for BMO LOCs is 4.45%. What your internet rate will be will depend on your credit score, credit history, financial situation and the type or line of credit you get.
Canadian Imperial Bank of Commerce
CIBC offers two different types of lines of credit. These are the:
- CIBC Personal Line of Credit
- CIBC Home Power Plan Line of Credit
Both of these have variable interest rates based on the CIBC prime rate, which is currently 4.45%. They both have open-ended terms, but the minimum credit limit is different for each. The minimum on the personal line of credit is $5,000, and the home power plan has a minimum credit limit of $10,000. The main difference between these two is that security is required for the home power plan, while it’s optional for the personal line of credit.
You can apply with CIBC online, in person, or over the phone.
Mogo
With Mogo, you can get something called the Mogomini line of credit. Essentially, this is a small line of credit that ranges from $500 to $3,500. However, the interest rate on this line of credit is 35%. Plus, in order to get approved, you need a minimum credit score of 600 and a minimum annual income of $35,000.on or over the phone.
CCredit Union Lines of Credit 2026
Credit unions in Canada offer many different credit products that are similar to those of banks. Let’s see how the lines of credit compare.
Meridian
One of the many credit products that Meridian Credit Union offers is lines of credit. They also have a few different options, including:
- Personal Lines of Credit
- Home Equity Lines of Credit
Their personal lines of credit offer flexible payments and variable interest rates that are based on the current prime rate. Meridian HELOCs start at 5.45% and are available as long as you own and have equity in your home. They also offer Meridian Flex Line Mortgages that combine your mortgage and line of credit.
First Ontario
First Ontario Credit Union offers 3 different kinds of lines of credit:
- Personal Lines of Credit
- Student Lines of Credit
- Home Equity Lines of Credit
With their personal lines of credit, you have the choice between secured and unsecured loans. The interest rates on secured lines start at 6.99%, and the interest rates on unsecured lines start at just 7.49%. For student lines of credit, the interest rates start at just 5.50%, and HELOCs start at just 6.49%, which is lower than many other credit unions and banks.
Vancity
Vancity Credit Union also has some options for lines of credit. The rate you’ll get depends on your entire credit limit as well as your credit score. If you’re looking for an LOC that offers over $5,000, then you’re looking at a rate of Vancity Prime plus Increment. If you’re looking for a line of credit loan under $5,000, then the interest rate is 17.90%.
Other Places to Get a Line of Credit
The above places aren’t your only option for lines of credit. Some other banks in Canada that also offer competitive rates include:
- Simplii Financial
- National Bank
- Desjardins
- ATB Financial
- Coast Capital Savings
- Servus Credit Union
You can even get an EQ Bank line of credit completely online. Unless you go with a stand-alone HELOC, you don’t have to worry about stress-test qualifications, just your total debt service ratio.
Credit Score Needed to Get a Line of Credit
Getting a line of credit is more difficult than getting a credit card or even a personal loan. Why is this? Well, this is mainly because lines of credit aren’t used one time. You can continue using them for as long as you like. They also have comparable interest rates to personal loans.
A good credit score is recommended to get a line of credit. Some credit lenders will give you an LOC with scores around 660. However, the ideal score for approval is 720 or higher. Some private lenders will give lines of credit to those with bad credit, but those who do have higher rates.
Will Applying Hurt Your Credit Score?
Yes, just like with any other type of credit, applying can cause a small drop in your score. This is because the lender performs a hard credit inquiry when you submit your application, and this can lower your score anywhere from 5 to 15 points. That said, this is simple to recover from by making your payments on time every month.
If you get a preapproval done when you apply, this is done with a soft credit inquiry instead of a hard one. This is different from overdraft protection which is given in smaller amounts and can usually be approved with a soft inquiry.
Amounts You Could Get With A Line of Credit
Credit limits on lines of credit in Canada vary depending on the financial institution. The minimum credit limit for most lines of credit is $5,000, but they can go as low as $1,000. The maximum credit limit is usually around $50,000, but some financial institutions will go up to $100,000 or higher.
Difference Between Lines of Credit and Credit Cards
Lines of credit and credit cards are similar in the fact that they are both forms of revolving credit and have pre-set credit limits. That said, there are quite a few differences between them. The first is interest rates. Most lines of credit have variable interest rates unlike loan which usually have fixed interest rates. The line of credit rates are also much lower, with averages of around 5% to 10%. Credit card interest rates in Canada are around 19.99%.
With both credit cards and LOCs, the interest is calculated daily and added to your statement every month. Because the interest rates on LOCs are lower, though, the monthly payments are lower, and they tend to be easier to pay off. Many people actually use lines of credit to pay off their credit card debt.
Another perk to lines of credit is that they have higher credit limits than credit cards. While there are higher-limit credit cards, they often have a lot of restrictions and can be more difficult to get approval for since they’re mostly based on your monthly household income.
Not all lines of credit are attached to debit or credit cards. You have to transfer money from the credit account to your chequing account before you can use it. You can also get cheques for your LOC account. Credit cards are more accessible and easier to use.
What Can Lines of Credit Be Used For?
Most financial institutions have no restrictions on what their lines of credit can be used for. That said, some of the most popular reasons people choose to get a LOC are:
- Renovations
- Rainy Day Funds
- Vacations
- Vehicle purchases
- Furniture
- Ongoing projects
- Tuition
- Consolidate debt
No matter what you use the line of credit for, though, the principal stays the same. Your minimum required payment is the interest, and you can make the payments on the principal whenever you like. You don’t even have to transfer the funds to your account to use it; you can also write cheques to take funds directly from the Line of Credit.
Can You Get a Joint Line of Credit?
In Canada, you can get a joint line of credit with a spouse, partner or family member. In order to get a combined loan plan, you need to fulfill the cosigner requirements. Both lines of credit holders are responsible for the amount borrowed, and they have equal access to the funds. It’s listed on both credit reports, and any late payments can negatively affect both credit scores.
What Happens if You Stop Making Payments on Your Line of Credit?
When you stop making payments on your line of credit, you’re going to incur missed payment consequences. In the first 30 days, there’s going to be a fee added to your balance by the lender, and default interest rates may apply on top of your daily interest accrual.
The account may also be frozen, and you won’t be able to withdraw any more funds. If you do pay the amount and have the account unfrozen, it will take a while before you can make a credit limit increase request.
After 30 days, you’re going to notice more than a credit report inquiry impact. Even though you aren’t in collections and default yet, you’re going to notice a large hit to your credit score and a negative mark.
After 3 to 6 months of missed payments, legal action is going to begin. The funds may even be transferred to collections where they will stay on your credit report for up to 7 years, whether you pay them or not.
HELOCs Vs. Readvanceable Mortgages
In Canada, a HELOC is a secured line of credit, often referred to as a secured loan, that allows for a maximum loan-to-value ratio of 80%. This means that you can use up to 80% of the equity in your home that isn’t mortgaged. However, home appraisal costs and legal fees for HELOCs that you need to consider.
A readvanceable mortgage, on the other hand, is a plan that combines a standard mortgage with a HELOC under one collateral charge. So, as you make your mortgage payments and increase your equity, your available room on your HELOC will increase automatically.
With a readvanceable mortgage, you essentially have an on-demand loan, but you don’t get to choose between a fixed or variable rate since lines of credit have variable interest rates. It will be separate from any other type of LOC you have, including a business line of credit, and the interest calculation formula will determine how much you owe every month.
In terms of use, they can be used for just about anything, including a debt consolidation loan, and along with balance transfer offers. Some use it as a payday loan alternative or instead of renovation financing options due to lower interest costs and no early repayment penalties.
Is Your Line of Credit Interest Tax Deductible?
The only time that line of credit interest is tax-deductible is if it’s used to earn investment or business income. So this includes investment secured lending, margin account borrowing and even investments secured by GICs. It can even be claimed during the interest-only period, and this tax-deductible interest is utilized by the Smith Manoeuvre.
How Lenders Calculate Debt Service Ratios
With mortgage and personal lenders, two main lenders are used. These are Gross Debt Service ratios and Total Debt Service ratios. The GDS measures the percentage of your gross income needed to pay for basic housing costs. The TDS includes everything in your GDS as well as your total debt payments.
Line of Credits Vs. Debt Consolidation Loans
There are some major differences between lines of credit and debt consolidation loans. While they both require credit approval, a lender is going to look closer at your debt-to-income ratio with a loan. This is because you’re going to have firm payments every month. Lines of credit are different because you can pay them at your own pace since it’s a revolving loan. However, having a higher balance will give you a lower credit score.
Another difference to consider is that loans have fixed rates and lines of credit have variable rates, so they’re impacted by Bank of Canada rate announcements. Every month, the interest accrued has to be paid on both loans, but the LOC will have changing monthly amounts. Your average balance will impact your credit score, no matter what your total credit limit is.
What Are Some Options for Borrowers With Bad Credit?
If you’re looking for bad credit borrowing options, you’re going to have a better chance borrowing from online and alternative lenders. However, alternative online lenders are also going to want to do credit checks, so getting credit builder loans can be helpful when looking to get unsecured personal loans or even secured and unsecured lines of credit
Even though there are many lenders that advertise easy access for bad credit borrowers, comparing lenders can help you avoid unnecessary monthly fees and find the option for you. Using an alternative lender, though, guarantees less focus on your credit score and more focus on your payment history. Since the rates are higher, you’re going to have more accrued interest and likely a lower credit limit.
If you’re looking for some of the best personal loans or lines of credit, then it’s a good idea to build your credit early by reducing your existing debt and making your payments on time. You can even get debit cards that work like credit cards in order to increase your credit score.
How to Close a Line of Credit
One of the most common reasons to get a line of credit is to cover education costs. It gives you flexible access to funds, and your credit typically stays in a good place as long as you make your payments on time. Once that’s paid off, though, many choose to close it.
In order to close a line of credit, all you need to do is make sure it’s completely paid and contact your financial institution to request it be closed. You can then request a confirmation of closing a line of credit, and see it off your credit report in 30 to 60 days.
