Line of credit vs personal loan in Canada

FCAC describes a personal loan as a fixed borrowing amount with regular instalments, while a line provides borrowing access up to a limit. A reusable limit is not automatically an advantage: it adds flexibility but can make it easier to keep a balance outstanding.

Ask both providers what it would cost to clear the same amount over the same period. Do not compare a loan’s principal-and-interest instalment with a line’s smaller minimum and call the difference a saving. The two payments may be accomplishing different things. Request a plan that reaches zero, not simply one that keeps the account current.

If expenses arrive at different times, write down the planned draws and the income expected to repay them. A line’s interest rate may change. Test what a higher payment would do to the budget and decide how you will prevent new draws from undoing repayments. Treat an approved limit as a ceiling, not a spending target.

List which accounts would be paid, whether there are transfer or discharge costs, and how you will avoid adding those balances back. If you cannot explain the repayment plan without using more credit later, ask about repayment support before committing to either product.