Lines of Credit · Canada
Line of Credit: A Reusable Borrowing Limit
A line of credit is a borrowing limit you can draw from, repay, and then use again, with interest charged only on what you actually owe. It comes in two broad forms: unsecured, based on your creditworthiness, and secured, backed by an asset such as your home. Here is how a personal line of credit works in Canada.
- Product family Lines of Credit
- Availability Canada-wide, licence-dependent
- Cost basis Lender-set, within federal limits
- Where it is regulated Federal ceiling + provincial rules
A lender approves an amount, you move money out when you need it, and you pay interest on the balance you have taken. As you repay, the room you freed up becomes available to borrow again. Most carry no fixed payoff date; lenders usually review them and can adjust the rate or limit.
What a line of credit is
A line of credit is often confused with a personal loan, and the two behave quite differently. A personal line of credit gives you ongoing access to money up to your limit, so you can cover a car repair this month and repay it over the months that follow. A term loan instead pays out once.
Secured vs unsecured lines of credit
An unsecured line of credit rests on your income, debts and credit history. No asset is pledged, which means the lender carries more risk and usually sets a smaller limit. A secured line of credit is tied to something you own, most often your home. At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending usually capped at 80%, as set out in the OSFI Guideline B-20. Because the lender can look to that asset, the rate is often lower and the limit larger. The trade-off is real: your home stands behind the debt.
How interest is charged on a line of credit
Most lines charge a variable rate tied to the lender's prime rate, so payments shift when rates move. Interest is calculated daily on your outstanding balance and billed monthly, which is why paying a little extra early quietly reduces what you owe. Ask what the current rate is, how it is set, and whether any annual or setup fee applies. The Financial Consumer Agency of Canada publishes plain-language material on borrowing costs.
Questions worth asking before you sign
- Is the rate fixed or variable, and what index is it tied to?
- Is the line secured or unsecured, and what happens if you default?
- What is the minimum payment, and does it cover any principal?
- Are there annual, setup or inactivity fees?
- Can the lender reduce or close the limit later?
Lenders check your credit report when you apply, and a free copy is available from Equifax Canada or TransUnion Canada through the Financial Consumer Agency of Canada. A line of credit can be a sensible tool for uneven expenses, but it is still debt, and decisions about it depend on your own circumstances. LoanGoose is a loan matching and comparison service, not a lender. The lowest rates are only available to the most qualified applicants.
What it costs
| Rule | Figure | What it means | Publisher |
|---|---|---|---|
| Home equity line of credit limit (federally regulated lender) | 65% of appraised value | Total secured lending against the property is usually capped at 80%. | Office of the Superintendent of Financial Institutions |
| Criminal rate of interest (federal ceiling) | 35% per year | Above this, an agreement is a criminal offence. | Government of Canada (Justice Laws) |
No amount, term or rate is attached to any link on this page. Anything a lender offers you depends on your file and their own criteria.
What you need before you compare
- Your goal in one sentence. The amount, the date you need it, and the date you can repay it.
- Your real monthly surplus. What is genuinely left after every fixed cost — not what you hope is left.
- A current picture of your credit file. You can request a free copy of your report from each national bureau, and correcting an error is free.
- Every existing debt and its rate. Consolidation maths only works when you can see the whole board.
- The total cost of each option. Compare total repayment, not the headline rate.
- A check that the lender is licensed. Federally regulated banks fall under FCAC; provincial regulators license most other lenders.
Rules where you live
| Province or territory | Payday lending status | Local page |
|---|---|---|
| Newfoundland and Labrador | Licensed regime — federal cap applies | Lines of Credit in Newfoundland and Labrador |
| Prince Edward Island | Licensed regime — federal cap applies | Lines of Credit in Prince Edward Island |
| Nova Scotia | Licensed regime — federal cap applies | Lines of Credit in Nova Scotia |
| New Brunswick | Licensed regime — federal cap applies | Lines of Credit in New Brunswick |
| Quebec | Payday lending not licensed | Lines of Credit in Quebec |
| Ontario | Licensed regime — federal cap applies | Lines of Credit in Ontario |
| Manitoba | Licensed regime — federal cap applies | Lines of Credit in Manitoba |
| Saskatchewan | Licensed regime — federal cap applies | Lines of Credit in Saskatchewan |
| Alberta | Licensed regime — federal cap applies | Lines of Credit in Alberta |
| British Columbia | Licensed regime — federal cap applies | Lines of Credit in British Columbia |
| Yukon | Province-dependent | Lines of Credit in Yukon |
| Northwest Territories | Province-dependent | Lines of Credit in Northwest Territories |
| Nunavut | Province-dependent | Lines of Credit in Nunavut |
Provincial rules change. Confirm the current position with the regulator before relying on it — see the sourced rules table.
Compare lines of credit options
This is a matching step, not an application with us — we are not a lender. Checking does not commit you to anything, and no amount, term or rate is promised here.
LoanGoose is a loan matching and comparison service, not a lender. We do not make loans, set rates or make credit decisions. We may earn a commission when you click or apply through our links. The lowest rates are only available to the most qualified applicants.
Questions people actually ask
What is a line of credit in simple terms?
It is a borrowing limit a lender sets for you after reviewing your finances. You can draw from it whenever you need to, interest applies only to the amount you have used, and repaid room becomes available again. It works more like a spending buffer than a lump sum.
How does a line of credit work compared with a personal loan?
A line of credit is revolving: you draw, repay, and draw again up to your limit. A personal loan is paid out once and repaid on a fixed schedule. The line suits unpredictable costs; the loan suits a known, one-time expense.
How do line of credit interest rates usually work?
Most carry a variable rate tied to the lender's prime rate, so your cost moves when rates move. Interest is typically calculated daily on the outstanding balance, and the rate you are offered depends on your credit history, income and whether the line is secured. The <a href="https://www.canada.ca/en/financial-consumer-agency/services/loans/personal-loans.html">Financial Consumer Agency of Canada</a> explains borrowing costs in plain language.
Can you get a line of credit for bad credit?
It is harder, and the terms are usually less favourable. Some lenders offer secured lines where an asset backs the borrowing, which can offset a weaker credit history. Compare offers carefully, and understand what you are putting at risk before signing.
What happens if you never use your line of credit?
Usually nothing beyond any inactivity or annual fee the lender charges. An unused limit does not build interest. Some lenders review limits periodically and may adjust them, so it is worth checking your agreement for those terms.
Is a line of credit cheaper than a credit card?
Often, yes, because lines of credit usually carry lower interest than most credit cards. That depends on the rate you qualify for and how quickly you repay. A lower rate still adds up if the balance sits there for years.
Where to go next
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Personal Loans
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Payday Loans
How payday loans work in Canada, what they cost, and why cheaper options are worth checking.
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Cash Advances
What a cash advance really costs, and how it differs from a short-term loan or an instalment loan.
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Instalment Loans
Compare instalment loans with fixed payments spread over a set schedule you agree to up front.
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Short-Term Loans
Compare short-term loan options in Canada and see how repayment timing drives the real cost.
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Loans for Bad Credit
How borrowing works when your credit history is uneven, and what to check before you apply.
All loan types · Borrowing by province · Calculators
Sources for this page
- OSFI Guideline B-20 — residential mortgage underwriting —
- Criminal Code s. 347 — criminal rate of interest —
- FCAC — debt and borrowing —
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.