Quick Comparison
| Feature | Personal Loan | Line of Credit | Credit Card |
|---|---|---|---|
| Type | Fixed installment | Revolving | Revolving |
| Interest rate | 7-15% (fixed or variable) | 6-12% (variable) | 19.99-22.99% |
| Payment structure | Fixed monthly payments | Interest-only minimum | Minimum 2-3% of balance |
| Forced payoff | Yes (set term) | No (can pay interest only) | No (minimum traps you) |
| Borrowing limit | $1,000-$50,000 | $5,000-$50,000+ | $1,000-$25,000+ |
| Rewards | No | No | Yes (cashback, points) |
| Access to funds | Lump sum upfront | Draw as needed | Draw as needed |
| Best for | Large, planned expenses | Flexible, ongoing access | Small daily purchases |
Interest Rate Comparison
Average Rates in Canada (2025)
| Product | Rate Range | Typical Rate |
|---|---|---|
| Secured line of credit (HELOC) | 5.5-6.5% | 5.45% (Prime + 0.5%) |
| Unsecured line of credit | 6.5-12% | 8-9% (Prime + 3-4%) |
| Personal loan (bank) | 7-13% | 9-11% |
| Personal loan (online lender) | 8-30%+ | 10-18% |
| Credit card (standard) | 19.99% | 19.99% |
| Credit card (low-rate) | 8.99-12.99% | 11.99% |
| Credit card (store) | 25-29.99% | 28.99% |
Annual Interest Cost ($10,000 Balance)
| Product | Rate | Annual Interest | Monthly Interest |
|---|---|---|---|
| HELOC | 5.5% | $550 | $46 |
| Unsecured LOC | 8.5% | $850 | $71 |
| Personal loan | 10% | $1,000 | $83 |
| Credit card | 19.99% | $1,999 | $167 |
| Store credit card | 28.99% | $2,899 | $242 |
When to Use Each
Personal Loan
| Situation | Why It’s Best |
|---|---|
| Debt consolidation | Fixed rate, forced payoff, saves interest |
| Large planned purchase ($5K+) | Lower rate than credit card |
| Home renovation | Fixed budget, predictable payments |
| Medical/dental expense | Structured payoff |
| Wedding financing | Set repayment schedule |
| Vehicle purchase | Fixed term (auto loan variant) |
Line of Credit
| Situation | Why It’s Best |
|---|---|
| Emergency fund alternative | Draw only when needed |
| Irregular expenses | Access without reapplying |
| Bridging cash flow gaps | Flexible access and repayment |
| Self-employed income smoothing | Cover lean months |
| Ongoing renovation project | Draw as costs arise |
| Short-term borrowing | Pay off quickly, lower rate |
Credit Card
| Situation | Why It’s Best |
|---|---|
| Purchases you can pay off monthly | 21-day grace period = 0% interest |
| Everyday spending (earn rewards) | Cashback/points only if paid in full |
| Online shopping (buyer protection) | Chargeback rights |
| Travel (insurance, no FX fees) | Travel cards offer insurance + rewards |
| Building credit history | Regular use + full payment builds score |
| Small emergency (<$1,000) | Quick access, pay off ASAP |
Repayment Comparison ($10,000 Debt)
Personal Loan (10%, 3-Year Term)
| Month | Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $323 | $83 | $240 | $9,760 |
| 12 | $323 | $62 | $261 | $7,199 |
| 24 | $323 | $38 | $285 | $4,267 |
| 36 | $323 | $3 | $320 | $0 |
| Total | $11,616 | $1,616 |
Line of Credit (8.5%, Interest-Only Minimum)
| Month | Minimum Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $71 | $71 | $0 | $10,000 |
| 12 | $71 | $71 | $0 | $10,000 |
| 24 | $71 | $71 | $0 | $10,000 |
| 36 | $71 | $71 | $0 | $10,000 |
| Total (3 years) | $2,550 | $2,550 | $0 | $10,000 still owing |
Credit Card (19.99%, Minimum Payment 3%)
| Month | Minimum Payment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $300 | $167 | $133 | $9,867 |
| 12 | $247 | $137 | $110 | $8,076 |
| 24 | $200 | $108 | $92 | $6,345 |
| 36 | $163 | $84 | $79 | $4,858 |
| Payoff time | ~16 years | |||
| Total paid | ~$18,500 | ~$8,500 interest |
The personal loan costs $1,616 in interest and is paid off in 3 years. The credit card costs $8,500+ in interest and takes 16 years at minimum payments.
Impact on Credit Score
| Factor | Personal Loan | LOC | Credit Card |
|---|---|---|---|
| Hard inquiry (applying) | -5 to -10 points | -5 to -10 points | -5 to -10 points |
| Credit mix (variety) | Helps (installment) | Helps (revolving) | Helps (revolving) |
| Utilization ratio | Does not affect | Affects (keep under 30%) | Affects (keep under 30%) |
| Payment history | Helps (if on time) | Helps (if on time) | Helps (if on time) |
| Available credit increase | No (fixed amount) | Yes | Yes |
| Best for building credit | Long-term mix | Ongoing | Monthly use + full payment |
Debt Consolidation Strategy
Example: $15,000 in Credit Card Debt
| Strategy | Rate | Monthly Payment | Total Interest | Payoff |
|---|---|---|---|---|
| Keep on credit card | 19.99% | $450 (min) | $12,000+ | 10+ years |
| Balance transfer card (0% for 12 months) | 0% then 22.99% | $1,250 | $0 (if paid in 12 months) | 12 months |
| Personal loan (10%, 3 years) | 10% | $484 | $2,424 | 3 years |
| Line of credit (8.5%) | 8.5% | $484 (match loan) | $1,945 | ~3 years |
| Best option | LOC or personal loan | Saves $8,000-$10,000 |
Where to Get Each Product
Personal Loans
| Lender | Rate Range | Best For |
|---|---|---|
| Big 5 banks | 7-12% | Existing customers, good credit |
| Fairstone | 19.99-39.99% | Lower credit scores |
| LendingArch | 9-30% | Quick online approval |
| Borrowell (marketplace) | Varies | Compares options |
Lines of Credit
| Lender | Rate | Best For |
|---|---|---|
| Big 5 banks (unsecured) | Prime + 2-5% | Good credit (680+) |
| HELOC (secured) | Prime + 0.5-1% | Homeowners |
| Tangerine | Prime + 1.5-4% | Online banking customers |
| Desjardins | Prime + 2-4% | Quebec residents |
Credit Cards for Debt Management
| Card Type | Rate | Best For |
|---|---|---|
| Low-rate card (MBNA, BMO) | 8.99-12.99% | Carrying a balance |
| Balance transfer (MBNA) | 0% for 12 months | Paying off debt quickly |
| Secured card | 17.99-19.99% | Rebuilding credit |
Decision Framework
| Question | Personal Loan | LOC | Credit Card |
|---|---|---|---|
| Need fixed payoff schedule? | Best | No | No |
| Need lowest rate? | Good | Best (unsecured) | Worst |
| Need flexibility? | Low | Best | Moderate |
| Want to earn rewards? | No | No | Yes |
| Paying off in < 1 month? | Unnecessary | Unnecessary | Best (0% grace) |
| Amount > $5,000? | Best | Good | Expensive |
| Amount < $1,000? | Unnecessary | Good | Fine (if paid off quickly) |
| Tendency to overspend? | Best (forced payments) | Risky (interest-only trap) | Worst (minimum payments) |