Unsecured/Personal Lines of Credit in Canada

A line of credit offers people an amount of money for purchases as the need presents itself. It can be considered a safety net; the funds can be left intact and as a need arises, people can withdraw the money to pay for emergency expenses or for large expenses when they do not currently have the entire amount in their bank accounts.

Secured personal lines of credit use an asset owned by the borrower to secure the loan. Because there is an asset involved, the interest rate will be lower. If Canadians do not have an asset to secure the loan, they can still obtain an unsecured line of credit, but their interest rates will be higher.

Advantages and Disadvantages of Obtaining a Line of Credit

The advantages of personal lines of credit are:

  • The ability to access funds when needed
  • The application process is only completed once
  • Borrowers can use a small amount of their credit or a large amount
  • Provides security for those who have an insecure income source
  • The interest rates are typically lower than people can receive from credit cards that can have interest rates as well above 10%

Personal lines of credit also have some disadvantage, and they are:

  • The temptation to spend the money within their credit limits on purchases that are not necessary
  • With flexible payment plans, people have the ability to take too much time paying these loans back and the interest can add up
  • If the loan was secured by an asset, there is the potential of losing it if the borrower cannot repay the loan

Different Types of Personal Lines of Credit

People have three different types of lines of credit they may obtain: The personal secured or unsecured line of credit, the home equity line of credit and the student line of credit.

Personal lines of credit do not necessarily require that people have a house to offer as security. The home equity line of credit, on the other hand, depends on the amount of equity people have in their homes. The student line of credit is like a student loan, but the student is not accepting the full amount up front.

The Royal Bank’s Line of Credit

The Royal Bank has a personal line of credit that provides people with the cash they need for any purpose, and the terms are very easy to follow:

  • With only one application, Canadians have a source of money throughout their entire lives
  • They can apply for an amount as low as $5,000
  • The interest rate will be variable
  • Canadians can choose to pay the minimum payment that will only be the greater of two percent of the balance and $50
  • They have easy access to the money with Line of Credit cheques
  • No penalties for paying the loan in full
  • They receive statements every month

The Bank of Montreal’s Line of Credit

Those who have a Bank of Montreal Everyday Banking Account have even easier access to their personal line of credit funds. They can obtain their money in three different ways:

  • Automated banking machines
  • Through the website
  • By telephone

TD Canada Trust’s Line of Credit

If Canadians obtain their personal lines of credit from TD Canada Trust, they will be able to access the money in an even easier fashion:

  • They can make withdrawals from their account from any TD Canada Trust branch
  • The funds from their personal lines of credit can be added to their TD Canada Trust Access cards and used all over the world
  • They can transfer the funds from the personal line of credit to other accounts by telephone
  • They also can use personal line of credit cheques

RBC Royal Bank’s Line of Credit

The RBC Royal Bank gives Canadians a choice: They can obtain personal lines of credit as well as unsecured lines of credit. The advantages of the personal line of credit are:

  • The ability to set up a large limit for a very low interest rate
  • The ability to obtain a limit between $5,000 and up to 80 percent of the current equity in their homes
  • They will receive a competitive interest rate based on the Prime Rate

With an unsecured line of credit, Canadians can be approved very quickly for the loan, obtain between $5,000 and $50,000 without having to offer a security and receive an interest rate that will be based on the consumer’s ability to pay.

CIBC’s Line of Credit

Obtaining a personal line of credit from CIBC means that Canadians will receive enough money to purchase the smaller things they need or larger purchases such as a new vehicle and will only need to pay the current interest rate of 3.00 percent. The benefits of a personal line of credit at this bank are:

  • A maximum amount of $200,000
  • No transaction fees charged for withdrawing the money
  • Receive free cheques

The secured line of credit gives Canadians a lower interest rate than the unsecured personal line of credit, but if people need money quickly and they are unable to obtain the secured personal line of credit, they can quickly become approved for the unsecured loan. They can borrow as much as $200,000 without a security.

Scotia Bank’s Line of Credit

A personal line of credit from Scotia Bank means that the application process is very easy for Canadians. They can apply by:

  • Telephone
  • Visiting a branch of Scotia Bank
  • Going online in a process that will take less than 10 minutes

Canadians who are concerned about what their monthly payments will be may benefit from a personal line of credit from Scotia Bank because if they need to, they may be able to qualify to make interest-only payments each month.

Canadians have the choice to obtain a credit card for unexpected and large purchases, but if they cannot pay their balances in full, they will pay higher interest rates. The personal secured and unsecured lines of credit offer lower interest rates, and may be more advantageous for Canadians expecting to need a sum of money in the near future they do not currently have.