Line of Credit Calculator

Lines of Credit in Canada: HELOC vs Unsecured LOC

A line of credit is a revolving borrowing facility that lets you draw funds up to a pre-approved limit, repay, and borrow again. Unlike a fixed loan, you only pay interest on the amount actually drawn. In Canada, LOC interest rates are tied to the prime rate set by each lender (which follows the Bank of Canada’s overnight rate). As of 2026, the prime rate sits around 5.45–5.95%, and LOC rates are expressed as prime plus a margin. Home Equity Lines of Credit (HELOCs) carry the lowest margins — typically prime + 0.5% to prime + 1.0% — because your home serves as collateral. Unsecured lines of credit range from prime + 1.5% to prime + 5.0% depending on creditworthiness.

HELOCs in Canada are governed by federal rules limiting the borrowable amount to 65% of your home’s appraised value. When combined with a mortgage, total borrowing cannot exceed 80% of the property value. Most HELOCs require interest-only minimum payments, which creates a risk: borrowers can carry a balance indefinitely without reducing the principal. Financial regulators have flagged this as a concern, as many Canadians carry HELOC balances for years, paying thousands in interest without making progress on the debt itself.

LOC Rate Comparison (Based on Prime = 5.70%, 2026)

To manage a line of credit effectively, treat it as a short-term bridge rather than permanent financing. Set a self-imposed repayment schedule that includes principal reduction — paying even $200 above the interest-only minimum on a $20,000 balance saves thousands over time. If your LOC balance has been stable or growing for more than 12 months, consider converting it to a fixed-rate loan with a defined payoff date. HELOC interest is tax-deductible only when the borrowed funds are used for investment or business purposes, not for personal expenses.