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Compare Line of Credit (LOC)

This is a type of account that lets Canadians borrow money when they need it, up to a pre-set borrowing limit, by using a bank card or writing cheques to make purchases or cash withdrawals.

Loans are one-time, non-revolving sums of credit that a borrower typically uses for a specific purpose. LOC are revolving credit lines that you can use in full or in part for everyday Canadian purchases or emergencies.

Why a LOC May be Better Than a Loan?

  • Only pay interest on the balance you use
  • Low interest rates
  • Indefinite repayment period
  • Easy to use

Top Questions...

What can I do with a credit line?

Canadians can use funds for any purpose. You are free to withdraw funds anytime within the credit limit without restriction.

Canadians can apply in the same way, they would for a bad credit loan. If you have any unforeseen expenses and need some additional cash to get you through the month, then this might be the best option.

What are the advantages of a LOC?

They are usually quick and easy to obtain for Canadians, the interest rates are low, and the repayment terms are more flexible than a personal loan.

What is the formula for calculating interest on a LOC?

The amount you draw from your credit line will determine how much interest you pay. Therefore, you are only charged interest if you make use of the available balance. There are no subscription fees, late fees, or other similar charges.

To keep things simple, you'll receive a monthly statement that shows your total outstanding balance as well as your minimum monthly payment.

Is a loan a better option?

Canadians are required to repay a loan over a set period, such as a month (like a short-term loan) or multiple years. Borrowing over a longer period usually results in cheaper rates (although this does not mean you can take out a one-month loan and pay it back two years later for a lower rate).

A LOC is more flexible as a set payment period is not required. You can utilise the cash anytime you need it, and you can repay as much as you wish (along with minimum payments, of course).

Is an overdraft a better option?

In Canada, a LOC and an overdraft are similar. They both allow you to borrow money whenever you need it. You usually don't have to pay anything if you don't use them.

Only an overdraft is linked to your Canadian bank account. No matter who you bank with in Canada, you can apply for a LOC.