Interested in a Home Equity Line of Credit in Ontario?

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When you need access to extra money—whether for renovations, debt consolidation, or emergencies—two popular options in Canada are the Home Equity Line of Credit (HELOC) and the Personal Line of Credit (Personal LOC). While both give you flexible access to funds, they’re very different when it comes to borrowing limits, interest rates, and how you qualify.

Key Differences: HELOC vs. Personal Line of Credit

Let’s start with the basics, but keep it quick.

A HELOC is a line of credit secured by your home. You’re borrowing against your home equity, so your house acts as collateral. This lowers the risk for the lender, which often means you get a larger limit and lower interest rate.

A personal line of credit is unsecured. That means there’s no collateral. Lenders give you a limit based on your credit score, income, and debt history. Since it’s riskier for them, they charge higher interest rates and offer smaller limits.

Here’s the bottom line:

HELOC = Secured by your home, lower rates, bigger limit

Personal LOC = Unsecured, higher rates, smaller limit

Both are revolving credit lines, so you can borrow, repay, and borrow again. But the approval process, costs, and ideal use cases are quite different.

How to Get a HELOC vs. Personal Line of Credit

Getting either product involves an application, credit check, and financial review—but the process is more involved for a HELOC.

To get a HELOC, you need to:

Be a homeowner with equity in your home

Work with a mortgage professional (either a broker or a branch rep)

Get a home appraisal (sometimes required by the lender)

Submit income documents (job letter, pay stubs, tax returns)

Go through legal paperwork, since a HELOC is registered on your title

Wait longer—approval and funding may take 2 to 3 weeks

A personal line of credit, on the other hand, is simpler:

No home ownership needed

No appraisal or legal costs

Application is often online or in-branch

Funds can be available within a few days if approved

If speed and simplicity matter more than getting the lowest rate, a personal LOC may be the better choice. But if you’re looking for a larger amount at a better rate, it’s worth going through the HELOC process.

Credit Limit for a HELOC vs. Personal Line of Credit

This is one of the biggest differences—and it’s usually the deciding factor for many homeowners.

A HELOC lets you borrow up to 65% of your home’s value, as long as your total mortgage + HELOC doesn’t go above 80% of the home’s value.

Let’s say your home is worth $800,000 and your mortgage balance is $400,000.

80% of $800,000 = $640,000 (this is your total borrowing limit)

You already owe $400,000 on your mortgage

That leaves up to $240,000 available for a HELOC

That’s a big chunk of accessible credit—much more than most unsecured options.

A personal line of credit is usually capped much lower. Most Canadians can expect limits between $5,000 and $50,000, depending on their credit profile. High-income individuals with excellent credit may qualify for more, but even then, it rarely matches a HELOC’s potential limit.

So, if you need to borrow a large amount, especially for home renovations or consolidating high-interest debt, a HELOC often wins.

Credit Score for a HELOC vs. Personal Line of Credit

When it comes to qualifying for a Home Equity Line of Credit (HELOC) or a Personal Line of Credit (Personal LOC) in Canada, your credit score plays a pivotal role.

HELOC:

Major Banks (A Lenders): Typically require a credit score of 680 or higher. This threshold ensures access to the most competitive interest rates and terms.

Alternative Lenders (B Lenders): May approve applications with credit scores as low as 550, provided you have sufficient equity in your home. Since the loan is secured against your property, lenders are more willing to accommodate lower credit scores, albeit at higher interest rates.

Personal LOC:

Unsecured Nature: Being unsecured, Personal LOCs generally demand higher credit scores. Lenders often look for scores of 700 or above to offer favorable terms.

Lower Scores: Applicants with scores below 650 might face challenges in approval or may be offered higher interest rates and lower credit limits.

In essence, while both credit products consider your creditworthiness, HELOCs offer more flexibility for those with lower scores due to the collateral involved.

Interest Rates for a HELOC vs. Personal Line of Credit

Interest rates are a crucial factor when choosing between a Home Equity Line of Credit (HELOC) and a Personal Line of Credit (Personal LOC). Here's how they compare:

Current Prime Rate in Canada: As of May 30, 2025, the prime rate stands at 4.95% .

HELOC:

Major Banks (A Lenders): Offer HELOCs at rates starting at prime + 0.50% translating to 5.45%

Alternative Lenders (B Lenders): For second-position HELOCs, rates start at approximately 7.49%.

Personal LOC:

Unsecured Lines: Interest rates vary based on creditworthiness but generally around 10% .

It's evident that HELOCs, especially those from major banks, tend to offer lower interest rates compared to Personal LOCs, making them a more cost-effective option for homeowners with sufficient equity.

When is a HELOC a Better Option?

A Home Equity Line of Credit (HELOC) is often the preferred choice for homeowners who:

Have substantial home equity: If you've built up significant equity in your home, a HELOC allows you to borrow against it, often at lower interest rates.

Seek lower interest rates: Since HELOCs are secured by your property, lenders usually offer more favorable interest rates.

Need a large credit limit: HELOCs typically offer higher credit limits compared to unsecured lines of credit, making them suitable for major expenses like home renovations.1

Plan for long-term projects: The flexibility of a HELOC is ideal for ongoing expenses or projects that span over several months or years.

Example: If you're planning a significant home renovation costing $100,000, a HELOC can provide the necessary funds at a lower interest rate, leveraging your home's equity.

When is a Personal Line of Credit a Better Option?

A Personal Line of Credit (LOC) might be more suitable if you:

Don't own a home or have limited equity: Since personal LOCs are unsecured, they don't require collateral.

Need emergency access to funds: The approval process for personal LOCs is generally faster and involves less paperwork.

Require a smaller credit limit: For expenses like emergency repairs or short-term cash flow needs, a personal LOC can suffice.

Example: If you need $10,000 for unexpected medical expenses, a personal LOC can provide quick access without the need to use your home as security.

HELOC vs. Personal Line of Credit in Canada

If you're deciding between a HELOC and a personal line of credit in Canada, the right choice depends on your financial situation, credit score, and whether you own a home with available equity. A HELOC typically offers a lower interest rate and a higher credit limit, but it requires homeownership and comes with legal setup costs. A personal line of credit is unsecured, easier to qualify for quickly, and doesn’t put your home at risk—but interest rates are usually higher, and borrowing limits are lower.

Before making a decision, it’s a good idea to speak with a mortgage professional who can review your full financial picture. They can help you compare real options, explain lender requirements, and determine which product fits your goals—whether it’s debt consolidation, emergency access to cash, or funding a big project. Choosing the right credit solution can save you thousands and reduce financial stress in the long run.