Line of Credit Calculator

Calculate interest costs and minimum payments for your line of credit.

LOC Details

$

Typically Prime + spread (Prime is currently ~7%)

Monthly Cost

$177.08

Payment TypeInterest Only
Annual Interest Cost$2,125

Lines of Credit in Canada

A line of credit (LOC) is flexible revolving credit you can use as needed. Unlike loans, you only borrow and pay interest on what you use, and you can re-borrow as you repay.

Types of Lines of Credit

Personal LOC (Unsecured): No collateral, rates Prime +3-6%, limits $5K-$100K

Secured LOC: Backed by home or investments, rates Prime +0.5-2%, higher limits

HELOC: Home equity line, rates Prime +0.5%, up to 65% of home value

Business LOC: For operating expenses, rates vary by business creditworthiness

Student LOC: For education costs, often Prime or Prime +0.5-1% while in school

How Interest Works

Interest is calculated daily on your outstanding balance and charged monthly. Unlike credit cards with grace periods, LOC interest starts accruing immediately when you borrow.

Example: $10,000 balance at 8% annual rate = $800/year interest = $66.67/month minimum payment

Advantages

  • Flexibility: Borrow only what you need, when you need it
  • Lower Rates: Much cheaper than credit cards
  • Reusable: Pay down and borrow again without reapplying
  • Interest-Only: Minimum payments keep cash flow manageable

Disadvantages

  • Variable Rates: Costs increase when Prime rate rises
  • No Forced Repayment: Easy to carry balance indefinitely
  • Can Be Recalled: Bank can reduce limit or demand repayment
  • Temptation: Easy access can lead to overspending

Disclaimer

This calculator provides estimates. Actual rates, limits, and terms vary by lender and borrower qualifications. LOC rates are variable and can change. Consult with your financial institution for specific details.

FAQ

How does a line of credit work?

A line of credit is revolving credit you can borrow from, repay, and borrow again. You only pay interest on what you use. Most require minimum monthly payments of interest only.

What's the difference between secured and unsecured LOC?

Secured LOCs use collateral (home, investments) for lower rates (Prime +0.5-2%). Unsecured LOCs have no collateral but higher rates (Prime +3-6%).

How much can I borrow with a line of credit?

Unsecured personal LOCs: $5,000-$100,000. Secured LOCs: Up to 65% of home value or 90% of investment value. Business LOCs vary widely based on revenue and creditworthiness.

Are LOC interest rates fixed or variable?

Most lines of credit have variable rates tied to Prime rate. When Prime changes, your rate changes. Some lenders offer convertible LOCs where you can lock in fixed rates on portions.

Is LOC interest tax deductible?

Interest is tax deductible only if funds are used for business or income-producing investments. Personal use (vacations, purchases, debt consolidation) is not deductible.