💳 Line of Credit Payment Calculator Canada — HELOC & Personal LOC
Unlike a mortgage with a fixed monthly payment, a line of credit's minimum payment is just the accrued interest — which means your balance can stay the same for years while you make payments. This calculator shows your real monthly interest cost and what it would take to actually pay down your LOC principal.
A $20,000 personal line of credit at 8% carrying a minimum interest-only payment of ~$133/month costs $1,600/year indefinitely without reducing the balance by a single dollar. To pay it off in 3 years requires $627/month. Enter your balance and rate to see your full repayment picture.
Lines of Credit in Canada — What Every Borrower Needs to Know
~5.45%
Bank Prime Rate 2026
Daily
Interest Calculation Frequency
How a Canadian LOC Works vs a Mortgage or Loan
A line of credit is a revolving credit facility — borrow up to the limit, repay, borrow again. Interest accrues daily on the outstanding balance at the annual rate ÷ 365. Unlike a mortgage with a mandatory amortising payment that ensures payoff, a LOC's minimum payment is typically just the accrued interest — no principal reduction required. This flexibility is powerful for managing irregular cash flows but dangerous for Canadians who don't have a formal repayment plan.
HELOC vs Personal LOC
A Home Equity Line of Credit is secured by your property, allowing much lower rates (prime + 0.5%–1% in 2026). Maximum HELOC is 65% of appraised value minus any existing mortgage. A personal LOC is unsecured (prime + 2%–5%). The HELOC is cheaper but puts your home at risk if you default. Most financial advisors recommend against using HELOC for consumer spending, vacations, or investments with more risk than the LOC rate.
❓ Frequently Asked Questions — Line of Credit Canada 2026
What is the difference between a line of credit and a personal loan in Canada?
A personal loan provides a fixed lump sum repaid in equal scheduled installments over a defined term — you know the exact payoff date and total interest from day one. A line of credit (LOC) is revolving: draw what you need, repay at your own pace above the interest minimum, and reborrow up to your limit. LOCs are more flexible but require discipline — without a mandatory repayment schedule, many Canadians pay only interest minimums and never reduce the principal. A LOC suits unpredictable or ongoing needs; a fixed loan is better for a known one-time expense where payment accountability matters.
What is the interest rate on a Canadian line of credit in 2026?
Most personal LOCs charge the lender's prime rate plus a margin based on creditworthiness. With Bank of Canada rate cuts from the 2022–2023 peak, most personal LOC rates in 2026 range from approximately 7%–11%. HELOCs charge lower rates — typically prime plus 0.5%–1% — because they are secured by your home. Variable-rate LOC costs move automatically with Bank of Canada rate decisions, meaning your monthly interest cost can change without any new agreement. Check your current prime rate at the Bank of Canada website and ask your lender for your exact margin above prime.
What happens if I only pay the minimum on my line of credit?
Paying only the monthly interest minimum means your principal balance never decreases. A $15,000 LOC at 8% costs approximately $100/month in minimum interest. Paying only minimums for 5 years means $6,000 in interest paid while still owing the full original $15,000. This is the LOC trap many Canadians fall into: the minimum payment feels like "making payments" but is mathematically equivalent to renting the money indefinitely with no progress toward payoff. Always pay more than the monthly interest charge — even an extra $100–$200/month reduces the principal and significantly shortens payoff time.
What is a HELOC and how does it differ from a personal LOC?
A Home Equity Line of Credit allows Ontario homeowners to borrow against home equity at significantly lower rates — typically prime plus 0.5%–1.0% versus prime plus 3%–6% for unsecured LOCs. The maximum HELOC is 65% of appraised home value minus your outstanding mortgage. HELOCs offer attractively low rates but secure the debt against your home — failure to service the debt can ultimately result in legal proceedings against your property. HELOCs are appropriate for large planned expenses (home renovation, education, business investment) where the low rate genuinely reduces borrowing cost. They are inappropriate as emergency funds or for consumer spending that generates no returns.
Should I consolidate credit card debt into a line of credit?
LOC consolidation is financially sound when: (1) the LOC rate is at least 8%–10% lower than your credit card rate (19.99% card to 9% LOC saves enormous interest), (2) you close or freeze the credit cards after consolidation to prevent reaccumulation, and (3) you treat the LOC like a fixed loan with a defined payoff date — not a revolving facility. The biggest failure mode: consolidating into a LOC, then running the cards back up, now owing both the LOC and new card balances. Without genuine behaviour change, consolidation just converts short-term high-interest debt into long-term lower-interest debt you carry indefinitely.
How does interest on a Canadian line of credit get calculated daily?
LOC interest is calculated daily on the closing balance: Daily Interest = (Annual Rate / 365) × Outstanding Balance. At 8% on $10,000: Daily Rate = 0.021918%; Daily Interest = $2.19/day = approximately $66.67/month. Because interest accrues daily, any payment reduces your balance immediately — paying on day 5 instead of day 30 saves 25 days of interest on the amount paid. For large outstanding balances, making payments immediately when cash is available rather than waiting for statement date meaningfully reduces annual interest costs without any extra effort beyond timing the payment earlier.
What is the best strategy to pay off a line of credit?
The most effective approach: set a fixed monthly payment of at least interest plus 2%–3% of the outstanding principal. For a $10,000 balance at 8%: monthly interest ≈ $67, 3% of principal = $300, total recommended payment = $367/month. This eliminates the balance in approximately 32 months with about $960 in total interest. Apply any windfall, bonus, or tax refund directly as a lump-sum payment — the interest you save immediately is your guaranteed return on that payment. Track your balance monthly to maintain accountability without a mandatory repayment schedule forcing the discipline.
When does a line of credit make sense versus a personal loan in Canada?
A LOC makes sense for: ongoing home renovation projects where costs emerge unpredictably, a financial safety net for self-employed Canadians with variable income, bridging financing for a real estate transaction, or a low-cost emergency backup for homeowners. A personal loan is preferable for: a known single expense, when you want the accountability of a mandatory repayment schedule, or when you are concerned about the temptation to reborrow once paid down. For most Canadians, the discipline imposed by a fixed loan payment consistently builds better financial outcomes than the flexibility of a revolving LOC with minimum-only payment temptation.
Does using a line of credit hurt my credit score in Canada?
Using a LOC affects your score through credit utilisation — the percentage of available credit being used. Carrying more than 30% of your LOC limit as a balance negatively impacts your score. A $20,000 LOC with a $7,000 balance is at 35% utilisation — slightly above the recommended threshold. Having a LOC with zero balance positively impacts score by showing available credit. Applying for a new LOC creates a hard inquiry temporarily reducing your score by 5–10 points. Making payments on time consistently builds positive payment history — the most important factor in Canadian credit scoring at both Equifax and TransUnion.