What is the difference between a HELOC and a personal line of credit?

A HELOC (Home Equity Line of Credit) is secured by your home, offering lower interest rates (prime + 0.5-1%) but requiring home ownership and equity. A personal line of credit is unsecured, with higher rates (prime + 2-5%) but no collateral needed.

What is the interest rate on a HELOC in Canada?

HELOC rates in Canada typically range from prime + 0.50% to prime + 1.00%, or about 5.45-5.95% as of early 2025 (with prime at 4.95%). Rates are variable and change with the Bank of Canada overnight rate.

Can you get a HELOC with bad credit?

It is difficult. Most major banks require a credit score of 680+ for a HELOC. Some alternative lenders offer HELOCs for scores as low as 550-600 but at higher rates (prime + 2-4%). Personal lines of credit also require good credit, typically 660+.

How much can I borrow with a HELOC in Canada?

You can borrow up to 65% of your home value minus your mortgage balance, to a maximum combined 80% loan-to-value. For example, a $600,000 home with a $300,000 mortgage could qualify for a HELOC up to $180,000 ($600K × 80% = $480K - $300K = $180K).

HELOC vs Personal Line of Credit in Canada 2026

Quick Comparison

Feature	HELOC	Personal Line of Credit
Secured by	Your home	Unsecured (no collateral)
Typical rate	Prime + 0.5-1.0%	Prime + 2-5%
Rate (early 2025)	5.45-5.95%	6.95-9.95%
Credit limit	Up to 65% of home equity	$5,000-$50,000 typically
Minimum credit score	680+	660+
Requires home ownership	Yes	No
Appraisal required	Yes	No
Setup costs	$200-$1,500	Usually $0
Time to approve	2-6 weeks	1-5 days
Risk	Your home is collateral	No collateral at risk

Interest Rate Comparison

Current Rates (Early 2025, Prime = 4.95%)

Lender	HELOC Rate	Personal LOC Rate
RBC	Prime + 0.50% (5.45%)	Prime + 3-4% (7.95-8.95%)
TD	Prime + 0.50% (5.45%)	Prime + 2.5-5% (7.45-9.95%)
BMO	Prime + 0.50% (5.45%)	Prime + 3-4.5% (7.95-9.45%)
Scotiabank	Prime + 0.50% (5.45%)	Prime + 2-4% (6.95-8.95%)
CIBC	Prime + 0.50% (5.45%)	Prime + 3-5% (7.95-9.95%)
Tangerine	Prime + 0.50% (5.45%)	Prime + 2.5-4% (7.45-8.95%)
National Bank	Prime + 0.55% (5.50%)	Prime + 3-4.5% (7.95-9.45%)

Annual Interest Cost Comparison

Balance	HELOC (5.45%)	Personal LOC (8.45%)	Difference
$10,000	$545	$845	$300/year
$25,000	$1,363	$2,113	$750/year
$50,000	$2,725	$4,225	$1,500/year
$100,000	$5,450	$8,450	$3,000/year
$150,000	$8,175	N/A (too high for unsecured)	—

How Much Can You Borrow?

HELOC

Factor	Rule
Maximum LTV for HELOC alone	65% of home value
Maximum combined LTV (mortgage + HELOC)	80% of home value
Formula	(Home value × 80%) – mortgage balance = max HELOC

Home Value	Mortgage Owing	Max HELOC
$400,000	$250,000	$70,000
$500,000	$300,000	$100,000
$600,000	$300,000	$180,000
$800,000	$400,000	$240,000
$1,000,000	$500,000	$300,000

Personal Line of Credit

Factor	Typical Range
Minimum limit	$5,000
Maximum limit	$35,000-$50,000
Based on	Income, credit score, debt ratios
Income requirement	Varies (generally $40,000+ for higher limits)

Qualification Requirements

Requirement	HELOC	Personal LOC
Minimum credit score	680+	660+
Home ownership	Yes	No
Sufficient equity	Yes (20%+ equity typically)	N/A
Income verification	Yes	Yes
Debt service ratios	GDS < 39%, TDS < 44%	TDS < 40-44%
Appraisal	Yes (bank may cover cost)	No
Legal/registration fees	$500-$1,500	$0
Time to approve	2-6 weeks	1-5 business days

Pros and Cons

HELOC

Pros	Cons
Lowest rates available	Your home is at risk
High credit limits ($100K+)	Requires home ownership + equity
Interest-only payments	Setup costs ($200-$1,500)
Tax-deductible interest (if used for investment)	Longer approval process
Access to large amounts	Variable rate risk
Can be used for renovations	Reduces available equity

Personal Line of Credit

Pros	Cons
No collateral needed	Higher interest rates
Quick approval (days)	Lower limits ($5K-$50K)
No setup costs	No tax deduction on interest
Available to renters	Harder to qualify for large amounts
No home equity required	May be reduced or cancelled by bank
Simpler application	Interest-only trap

When to Use Each

Choose a HELOC

Situation	Why
Home renovations	Lower rate, potentially increases home value
Debt consolidation (large amount)	Save thousands in interest
Investment (Smith Manoeuvre)	Interest becomes tax-deductible
Emergency fund alternative	Low-cost access to funds
Bridging between house sale/purchase	Short-term access to equity
Need $50,000+	Personal LOC limits are too low

Choose a Personal LOC

Situation	Why
You don’t own a home	Only option
Need $5,000-$25,000	Quick, no setup costs
Short-term borrowing	Don’t want to risk home
Smaller renovations	Not worth HELOC setup cost
Emergency expenses	Fast access
Travel or large purchase	Manageable amount, quick payoff

The Smith Manoeuvre (HELOC Tax Strategy)

Step	What Happens
1	Pay down mortgage to build equity
2	Borrow from HELOC (readvanceable mortgage)
3	Invest HELOC funds in income-producing investments
4	Deduct HELOC interest on your tax return
5	Use investment income + tax savings to pay down mortgage faster
6	Repeat — convert non-deductible mortgage to deductible investment debt

This only works with a HELOC, not a personal line of credit, because the borrowed funds must be used for income-producing investments and the loan must be secured.

Repayment Comparison

Feature	HELOC	Personal LOC
Minimum payment	Interest only	Interest only (some require 1-3% of balance)
Payment on $50K at 5.5%	$229/month (interest only)	$352/month (interest only at 8.5%)
Risk of interest-only trap	High — balance never decreases	High — balance never decreases
Recommended approach	Pay interest + principal monthly	Pay interest + principal monthly
Time to pay off $50K (5% extra)	~12 years	~10 years (higher payment)

Alternatives to Consider

Alternative	Rate	Best For
Fixed-rate personal loan	6-10%	Fixed payments, forced payoff
Balance transfer credit card	0% for 6-12 months	Short-term, small amounts
Mortgage refinance	4-6%	Large amounts, fixed payment
Second mortgage	6-12%	Need equity access, denied HELOC
RRSP loan	Prime to Prime + 1%	Short-term RRSP contribution