Personal line of credit in Canada: how it works
Quick summary
A line of credit lets you borrow up to a limit and pay interest only on what you use. The rate is usually variable. Your minimum payment is usually about one month of interest, so paying only that never lowers what you owe. Next step: see how a home equity line of credit differs.
Checked November 2, 2026. Main source: TD, Your how-to guide to borrowing (no date shown, last confirmed November 11, 2026). See all 3 sources.
How it works
- You can borrow up to a set limit, for any purpose, and take as much or as little as you need.
- You can repay at any time and pay interest only on what you borrowed.
- Interest starts the day you take the money out and runs until it is repaid.
- You can take money out by cheque, ATM, online or phone bill payment, or a transfer to chequing.
Source: Financial Consumer Agency of Canada, Lines of credit. Checked November 2, 2026.
Rates and payments
- Rates are usually variable, so they can go up or down.
- A higher credit score generally earns a lower rate.
- You get a monthly statement. The minimum payment is usually about the month's interest. Paying only that never reduces the amount you owe.
Source: Financial Consumer Agency of Canada, Lines of credit. Checked November 2, 2026.
Secured or unsecured
| Type | What backs it | What to know |
|---|---|---|
| Unsecured (personal, student) | Nothing | Rates are usually below credit cards and personal loans |
| Secured | An asset, such as a car or home | Lower rate, but the lender can take the asset if you default |
| Home equity line of credit | Your home | Usually a higher limit and lower rate than other loans and lines |
Source: Financial Consumer Agency of Canada, Lines of credit. Checked November 2, 2026.
How lenders decide
They check who you are, your income, your debts, and your credit report and score. Some lenders ask for a minimum household income.
Source: Financial Consumer Agency of Canada, Lines of credit. Checked November 2, 2026.
How to apply for a line of credit
TD and BMO list similar steps. Apply online or with a lender's representative. A TD page says an online decision is usually immediate unless more review is needed, and a representative can help if you are declined.
- Research: confirm the rate, repayment terms, whether extra payments are allowed and whether it needs collateral (BMO).
- Check your credit report and score, because lenders use them to judge if you will repay on time (BMO). Checking your own score in the TD app does not affect it, per TD.
- Work out the total cost, including interest and your expected monthly payments (BMO).
- Gather your documents: government photo ID, proof of income, and your bank details for deposits and repayment.
- Apply. By applying you agree to a credit check, which TD says shares your information with the credit bureaus.
- If you are approved, you get a set limit, a rate and a repayment term. You pay interest only on what you borrow.
| TD | BMO | |
|---|---|---|
| Income proof | Last two pay stubs, or last two Notices of Assessment if you are self-employed | Pay stubs, and at least two years of tax returns |
| ID | Original, unexpired government ID | Government photo ID, plus name, address and phone number |
| Other | Expense statements and a bank details form. A co-signer needs the same documents | For a secured line, a mortgage statement and recent property tax statements |
Sources: TD, Your how-to guide to borrowing (no date shown, last confirmed November 11, 2026); BMO, How to apply for a loan or line of credit (no date shown, last confirmed November 11, 2026). Lenders differ, so ask the one you apply to.
Pros, cons and what to compare
- Pro: rates are usually lower than credit cards or personal loans.
- Pro: you can borrow, repay and borrow again, with no set purpose.
- Con: easy access can lead to overspending and serious debt.
- Con: a rate increase can make repayment harder.
- Compare: secured or unsecured, the rate type, set-up, yearly and administration fees, and the terms of any optional insurance.
- Optional credit insurance is not needed to be approved. The lender cannot require it, and you must say yes to it.
Source: Financial Consumer Agency of Canada, Lines of credit. Checked November 2, 2026.
See what a loan costs in total
Enter the amount, the rate, the length and any flat fee from an offer. The total you repay is the number to compare.
You borrow $5,000 and repay $6,782 in total.
That is $188.38 a month. The interest alone is $1,782.
Every $1 you borrow costs $1.36 to repay. The cost of borrowing is $1,782.
Nothing you type here is saved or sent. These are estimates. Your lender's contract is the final word, and it may add fees or insurance.
Questions people ask
What is a line of credit?
A credit limit you can borrow from, repay and borrow from again. You pay interest only on what you use.
Is a line of credit rate fixed or variable?
Usually variable, so it can go up or down.
Why does my balance not go down?
The minimum payment is usually about one month of interest, so paying only the minimum never reduces what you owe.
How do I apply for a line of credit?
Research the rate and terms, check your credit, gather ID and proof of income, then apply online or with a lender. TD says an online decision is usually immediate unless more review is needed.
What documents do I need for a line of credit?
TD lists government ID, your last two pay stubs or Notices of Assessment, expense statements and bank details. BMO lists photo ID, pay stubs and at least two years of tax returns, plus mortgage and property tax statements for a secured line.
What is the difference between a line of credit and a credit card?
The agency compares them mainly on rate. Lines of credit are usually cheaper. Check each product's fees and terms.
What is the difference between a secured and unsecured line of credit?
A secured line is backed by an asset such as a car or home and usually has a lower rate. If you default, the lender can take the asset. An unsecured line has no collateral.