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A Guide to How Lines of Credit Work in Canada

July 24, 2025

By Sarah Sumner


How Does a Line of Credit Work?


When a borrower is offered a Line of Credit, they don’t have to apply every time they need to withdraw from the loan. They can borrow as much or as little as they want when they want, up to the credit limit. They then only pay interest on what they borrow. The borrower can use the funds for almost anything they want or need. The application journey is like most loan processes.


Lines of Credit: A Powerful Credit Tool


A Line of Credit in Canada can be a good loan tool for a borrower. It offers a borrower the advantage of making their loan work the best way for them. It’s a versatile way to borrow money, and it doesn’t have to be for a specific purchase. The borrower is in charge of where they spend their loan funds.


Benefits of Using a Line of Credit


  • Apply once, use as little or as much as needed up to the credit limit.
  • Choose when and where to spend funds.
  • Funding is available on an ongoing basis.
  • Pay interest only on funds used.

Secured Line of Credit vs. Unsecured Line of Credit


Secured Line of Credit


This kind of loan is secured with collateral. A secured Line of Credit may offer the borrower more money than an unsecured Line of Credit, depending on the lender and the collateral value.


Unsecured Line of Credit


This type of loan does not have collateral. The lender will review credit history, ability to repay, and other factors during the loan process.


Eligibility and Application


  • Government-issued ID
  • Steady source of income
  • Active bank account
  • Active phone number
  • Proof of address

This information is presented for educational purposes only. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.