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Updated 2mo ago.
Updated 2mo ago.
A line of credit is a flexible loan offered by a financial institution that allows you to borrow money up to a pre-set limit, repay, and borrow again as needed. Unlike a traditional loan, you only pay interest on the amount used. It can be personal or secured against your home equity (HELOC).
A home equity line of credit (HELOC) at National Bank might offer a rate of prime + 0.5% (approximately 5.25% in 2025), while an unsecured personal line of credit could be at prime + 3% (approximately 7.75%). On a $50,000 balance, that is about $1,250/year more in interest with the personal line.
Before investing, make sure you have paid off your high-interest debt (credit cards, personal lines of credit). An average stock market return of 7–8% per year does not offset a 7–8% interest rate on a line of credit, especially after tax. Prioritize: emergency fund → high-interest debt → TFSA/RRSP contributions → investments.