A personal line of credit is one of the most flexible borrowing tools available to Canadians. Unlike a personal loan — where you receive a lump sum and repay it on a fixed schedule — a line of credit lets you borrow what you need, when you need it, up to a set limit. You only pay interest on what you actually use.
This flexibility makes a line of credit ideal for ongoing or uncertain expenses: home renovations with unpredictable costs, self-employment income gaps, or a financial cushion for emergencies. But that same flexibility can also make it easy to overspend without a clear repayment timeline.
When approved, you're given a credit limit — say $100 or $25,000. You can draw any amount up to that limit at any time, via online transfer, cheque, or debit card (depending on the lender). You're charged interest only on the balance you've drawn, not on the full limit.
Repayment is flexible: you must make minimum payments (typically the monthly interest on the outstanding balance), but you can pay more — even the full balance — at any time without penalty. As you repay, the credit becomes available again (it's revolving credit).
No collateral required. Available to borrowers with good credit and stable income. Credit limits typically range from $5,000 to $50,000. Interest rates are higher than secured options — typically prime rate plus 3–7% (roughly 9–13% in 2025). Offered by banks and credit unions.
Secured by your home equity. A Home Equity Line of Credit (HELOC) offers much lower rates — typically prime plus 0.5–1% — but your home is collateral. You can borrow up to 65% of your home's appraised value (or 80% when combined with your mortgage balance). This is a separate product from a personal line of credit and has its own rules.
Offered to full-time post-secondary students, often with lower rates and deferred repayment until after graduation. Amounts depend on the program (professional programs like medicine or law can access $150,000+). Often offered at prime rate with no additional spread for students in professional programs.
Personal line of credit rates are variable and tied to the bank's prime rate, which moves with the Bank of Canada policy rate. In 2025, the Bank of Canada prime rate sits around 4.95–5.45% depending on recent decisions.
Because rates are variable, your payments will change as the Bank of Canada adjusts its policy rate. This is an important consideration if you're carrying a large balance.
Lenders evaluate the same factors as for personal loans, but lines of credit generally require stronger credit profiles because of the revolving, open-ended nature of the product:
The right choice depends on your situation:
For debt consolidation, a personal loan is usually better because the forced amortization schedule ensures the debt actually gets paid off. With a line of credit, it's easy to keep the balance high indefinitely by only making minimum (interest-only) payments.
One of the biggest risks of a line of credit is paying only the minimum — which is typically just the monthly interest. If you borrow $100 at 10% and only pay the monthly interest (~$83/month), you've paid $1,000 after a year and still owe $100. Nothing has been paid down.
Treat your line of credit like a term loan: set a self-imposed payment schedule that will actually retire the balance within a defined period. Many Canadians carry line of credit balances for years or decades, paying enormous amounts of interest on debt that never shrinks.
A line of credit on your credit report can actually help your score over time if managed well — as long as your utilization (balance divided by limit) stays below 30% and you never miss a minimum payment. Having available credit you don't use is a positive signal to lenders. But a high utilization or chronic balance near the limit does the opposite.
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