Calculator · What a revolving balance actually costs, and how long it takes to clear at your current payment.
Line of credit interest calculator
Enter the balance, the rate and the payment you make to see the monthly interest, how much principal you actually repay, and how long the balance takes to clear.
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A line of credit is revolving: as you repay, the room comes back, which is exactly why balances tend to persist. Paying a fixed amount rather than a percentage of the balance is what actually clears it.
How this works
Revolving credit behaves differently from a loan
A line of credit has no scheduled end. You are typically required to pay interest, and any principal repayment is your choice. That is why the balance can persist for years while the payment feels comfortable: the payment may be covering little more than the interest.
The test that matters
Compare your payment to the monthly interest. If the payment is below the interest charge, the balance grows every month. If it is only slightly above, you are paying mostly interest and the payoff date is very far away. A fixed payment rather than a percentage of the balance is what actually clears a revolving debt.
Where the rate comes from
- Lines of credit are usually priced as a lender's prime rate plus or minus a margin.
- A secured line of credit, such as a home equity line, usually carries a lower margin than an unsecured one.
- Revolving credit is generally repayable on demand, so the lender can reduce or withdraw the limit.
Why an emergency fund beats a credit line
A line of credit can be frozen exactly when you need it most. It is a useful cash-flow tool, not a substitute for savings.
Questions
Is a line of credit cheaper than a loan?
The rate usually is, because the lender can adjust it and it may be secured. The total cost is not automatically lower, because a revolving balance has no scheduled payoff unless you impose one.
Can my lender reduce my limit?
Yes. Revolving credit is generally repayable on demand and the lender can reduce or freeze the limit. That is why a line of credit should not be relied on as an emergency fund.
How is the interest calculated?
Interest accrues on the outstanding balance, usually daily and charged monthly. Paying earlier in the month reduces the average balance that interest is charged on.
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Lending rules and benchmark rates
The sourced rules these calculators assume.
Sources
- Financial Consumer Agency of Canada — debt and borrowing —
- Payday Lending Regulations, SOR/2024-114 —
- OSFI Guideline B-20 —
Every figure on this page is attributed to the publisher above. Where a value could not be verified against the publisher's own publication, it is left out rather than estimated.