2022 Basic Guide on Line of Credit in Canada:

by | Jul 8, 2022

Are you interested in opening a line of credit in Canada? Don’t worry; we’ve got you covered. From small purchases to large-ticket items, a line of credit is an easy way to fund your investments. So, don’t hesitate to contact Yogi & Associates. Find out what we can do for you and why you should consider opening a line of credit. 

Newcomers to Mississauga may not know what LOC is. This means that they often overlook it as an option for financial needs. Having a credit line gives you access to a larger credit limit and flexibility in using that credit. So, let’s read the article to understand what it means.

1. What is a Line of Credit?

A credit line is a great way to cover expenses or credit needs. It works like a regular loan when you need it. You can also draw, reimburse, and lend again up to the amount of your credit limit without reapplying. You can withdraw money when you need it most and use it for any purpose!


Getting a LOC in Mississauga is easy and convenient. Fill out a few forms, and we’ll get you approved for an easy credit line that lets you borrow more money when needed.

2. Importance of a Line Of Credit:

A credit line is essential in the life of small and medium-sized companies. It helps them provide the basic needs of their staff. It also helps them keep up with the latest technology, maintain a qualified workforce, etc. Moreover, it provides access to funds you use for different purposes. 

For example, if you live in Mississauga, the most common loans are against your home and personal lines of credit. Or if you need cash, whether you’re getting a new car or building furniture, your options include lines of credit. You can also borrow against your home equity if you own or have equity in another property.

To learn more about Home Equity Line of Credit, see our article: How to get Home Equity Line of Credit? A Simple Guide 2022

3. How Does LOC Work?

A LOC is an agreement between you, the borrower, a bank, or another financial institution. The goal is to craft an acceptable interest rate. After that, offer a flexible repayment schedule to make borrowing available to people with diverse needs. The Lender will determine your credit limit (knowing your income and debts). If your account is paid on time, you can open your available credit whenever possible.

Here is a video of a detailed explanation of how credit line works.

4. Types of Line of Credit:

1. Secured Line of Credits.
2. Un-secured Line of Credits.

Secured Line of Credits:

It is a great way to access funds you may need in the future. You use your home or other valuable assets as collateral, which is security for the loan. The investor can be hopeful that even if you default on your payments, they will be repaid from your assets. 

Due to the lower risk to borrowers, interest rates on these loans are higher than the average. This may be a good option if you’re planning on buying a house or investing in property here in Mississauga. It’s priced below credit cards, but the interest rate may be higher than a credit card would offer.

Unsecured Line of Credits:

A mortgage or other asset does not secure an unsecured line of credit. This means that it doesn’t need collateral to ensure the loan amount. So you don’t have to meet the Lender’s requirements for a return when you want to make your payments. In addition, it allows borrowers to build a good credit history before receiving any interest-paying funds. The unsecured line of credit is a personal line of credit and a student line of credit.

5. Who Needs a Line Of Credits?

Businesses operating in Mississauga need LOC for two simple reasons.

1. Many small businesses require an accessible line of credit to help fund their projects and operations.
2. Small business owners often need to borrow cash before getting a loan can be difficult.

6. Requirements to Get LOC:

Financial institutions ask for a short set of papers when you apply. These may consist of:

1. Driver’s license or other official photo identification.
2. Employment verification.

There may be more factors, such as:

1. Your earnings.
2. A credit rating.
3. Debt levels at the moment.
4. The lending institution will probably verify your credit report when examining your application.

7. How to Apply For LOC?

The criteria to apply for a LOC includes:

1. If you’d like to open a line of credit, you usually need at least a good credit score and adequate income.
2. Repayment capacity considers your steady income and the total amount of other debt you are currently carrying.
3. House price, which applies only to home equity lines of credit.
4. The course of study or institution, for a line of credit only.

8. Pros and Cons of Line of Credit:

Pros/Cons Pros Cons
Interest Rates The primary benefit of using a line of credit is that interest rates are kept low, allowing you to enjoy greater financial stability. Interest rates fluctuate and can change as they relate to your ability to make payments.
Repayment Because there is no set repayment schedule or grace period, you do not need to be organised to repay the money you lend. If you fail to make payments on your line of credit, the same bank or creditor may reduce your credit limit or require repayment at any time, with or without notice.
Rules of Bank You could save money on bank fees if your bank allows you to transfer overdrafts from your main account to your credit line. Your bank or other lender has the authority to lower your credit card limit or demand that you repay the loan immediately (with notice)

9. Interest Rate of LOC in Canada:

Credit line interest rates in Canada are usually variable. They rise and fall along with the prime rate. Right now, the prime rate is at 3.7 percent. It may increase as the Bank of Canada attempts to tackle post-pandemic inflation. 

Finding the best interest rate for your LOC is easier said than done. There are a few things to keep in mind when you’re comparing the top rates:

1. Canadian credit card interest rates fluctuate. The prime rate is 3.7%, but it will likely go up as the Bank of Canada tries to manage post-pandemic inflation.
2. Credit line interest rates are also dependent on your credit score. The higher your score is, the better deal you may get.
3. The interest rate depends on the financial institution you’re looking at. Online banks offer lower rates but can be hard to reach. If this is how you like to deal with people, stick with one of these big banks.


1. Should we take a line of credit?

That depends on your needs. With a credit line, you can access cash before any planned expenses. Available terms include variable-rate loans, fixed-rate loans, and fixed-term loans.

2. What is the difference between a line of credit and a credit card?

LOC and credit cards are two different products with similar purposes. But have their benefits and drawbacks. So depending on your personal needs, it may be better to choose either as your method of debt repayment.

3. For how long does a line of credit last?

You have LOC for 10 to 15 years following your initial draw period. During the draw period, you can use your LOC as much as you need without worrying about running out of funds.

4. Which one is the easiest loan to take?

Home equity loans are a great way to access the value of your home, or to repair and remodel it. We have a variety of loans to choose from, so you can get financed no matter what your credit history is.

The Bottom Line!

A credit line may be the perfect solution if you have an emergency and need funds. It’s like a bucket of loonies, where you pay interest only on the number of Loonies you have at any given time. As a resident of Mississauga, you know there are more ways than one to send money to family. With LOC, you can transfer money anywhere globally with minimal fees. Contact Yogi & Associates today for more information!


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