Canada Loans & Lines of Credit Guide

the loans and the lines of credit in Canada. The personal loan is the "installment loan" with the fixed payment (the "fixed rate" or the "variable rate"). The line of credit (the "LOC") is the "revolving credit" — the "borrow and repay anytime" — the "interest on the outstanding balance only". The HELOC (the "Home Equity Line of Credit") is secured by the home equity — the maximum 65% LTV (the "loan-to-value ratio") for the HELOC portion, and the 80% total CLTV (the "combined loan-to-value ratio") for the HELOC plus the mortgage (the "OSFI B-20 guideline"). The payday loan is the "high-cost short-term loan" — the "maximum $15 per $100 borrowed" (the "provincial regulation" — the "Ontario cap at $14 per $100" — the "BC cap at $10 per $100"). The Canada Student Loan is the "federal student loan" (the "interest-free during the studies" — the "repayment starts 6 months after the graduation").

Personal Loans

Unsecured personal loan: The "no collateral loan" — the "no asset backing". The interest rate is 6% to 12% (depending on the credit score). The loan amount is $1,000 to $50,000. The term is 1 to 5 years.
Secured personal loan: The "collateral-backed loan" — the "secured by the car, the GIC, the savings". The interest rate is 4% to 8% (the "lower rate due to the collateral"). The loan amount is up to 100% of the collateral value.
Installment loan: The "fixed payment loan" — the "fixed monthly payment" — the "amortized loan". The car loan and the mortgage are the types of the installment loans.
Loan providers: The banks (the "Big Five" — the RBC, the TD, the Scotiabank, the BMO, the CIBC), the credit unions (the "Vancity" — the "Meridian" — the "DUCA"), the online lenders (the "Mogo" — the "Borrowell" — the "Fairstone"), and the "peer-to-peer lenders" (the "Lending Loop" — the "GoPeer").

Home Equity Line of Credit (HELOC)

HELOC rules: The maximum HELOC amount is 65% of the home value (the "LTV limit"). The total mortgage plus the HELOC cannot exceed 80% of the home value (the "CLTV limit"). The HELOC is the "revolving credit" — the "minimum monthly payment is the interest only".
HELOC interest rate: The "prime rate + 0.5% to 2%" (the "variable rate"). The typical HELOC rate is 5% to 8% (depending on the Bank of Canada rate). The HELOC rate is lower than the unsecured LOC rate.
HELOC uses: The "home renovation" (the "most common use"), the "debt consolidation" (the "pay off the high-interest debt"), the "investment property down payment" (the "Smith Manoeuvre"), the "emergency fund", and the "large purchase".
HELOC risks: The "variable rate risk" (the "rate increases increase the payment"). The "home is the collateral" (the "default can lead to the foreclosure"). The "interest-only payment" (the "principal is not paid down automatically").

Payday Loans

Payday loan regulation: The payday loan is the "high-cost short-term loan" — the "maximum 14 to 15 days term". The maximum fee is regulated by the province: Ontario ($14 per $100), BC ($10 per $100), Alberta ($12 per $100), Quebec ($0 — the "no payday loans" — the "35% APR cap").
Payday loan alternatives: The "credit union small loan" (the "CU alternative loan" — the "CUDL" — the "low-interest loan"), the "government benefits advance" (the "social assistance advance"), and the "employer pay advance" (the "wage advance program").
Payday loan risks: The "high APR" (the "390% to 600% APR" — the "annualized interest rate"). The "debt trap" (the "borrow again to pay the previous loan" — the "rollover loan"). The "collection practices" (the "aggressive collection" — the "credit impact").

For the mortgages and the mortgage qualification, see our Mortgages Guide →. For the debt management and the consolidation, see our Debt Management Guide →.