Lines of Credit in New Brunswick

How lines of credit works in practice

The structure sits between a credit card and a loan. Like a card it revolves, so the limit is reusable. Unlike a card it usually has no rewards programme and no interest-free grace period on a purchase, but its rate is normally far lower because the lender's risk is priced more directly.

Lines of credit come secured and unsecured. A secured line is registered against an asset — most commonly a home, which is a home equity line of credit — and prices lowest because the lender's recovery is strongest. An unsecured line is priced on your credit profile alone.

Most lines are variable-rate, expressed as a lender's prime rate plus or minus a spread, and most are demand facilities: the agreement sets out when the lender may reduce or call the balance. That is standard, and it is worth reading before you rely on the limit.

What drives the cost

Interest accrues only on the drawn balance, which is the product's central advantage. An untouched limit costs nothing beyond any annual fee the lender charges.

Because the rate is usually tied to prime, the cost moves with policy. That is a real exposure if the balance is large or will be outstanding for years, and it is the main argument for converting a persistent balance into fixed-rate amortising debt.

The ceiling is unchanged: the criminal rate of interest is 35% per year (Criminal Code s. 347). A line of credit is ordinary consumer credit and sits under the same outer limit as any other product.

Watch the minimum payment. On many facilities it covers interest only, so the balance does not fall on its own — the difference between a facility that is paid off and one that persists for a decade is a standing principal payment.

Where this product goes wrong

Line of credit, card, or instalment loan

Using a line of credit well

1. Ask whether it is secured. The rate difference is real, and so is the consequence of default.
2. Confirm how the rate is set. Prime plus a spread means the payment moves when policy moves.
3. Set a standing principal payment. The minimum usually covers interest only.
4. Keep the limit undrawn where you can. An undrawn facility is available money at no cost and a genuine buffer.
5. Convert persistent balances to amortising debt. A balance unchanged after a year is a loan wearing the wrong label.

What usually costs less

For a known, one-off cost, a fixed-rate instalment loan is often cheaper overall because it forces repayment and its rate cannot drift. For a genuinely uncertain or staged need, a line of credit is the better instrument — provided a principal payment is set from the start. If the purpose is to replace expensive card debt, compare the total cost of the line against the cost of the card debt it replaces, including any annual fee.

After you sign

Review the facility yearly. If the balance has not moved, convert it, because the rate will not fall on its own and the interest will keep accruing.

If the line is secured and you plan to sell or refinance the asset, remember the charge has to be discharged at closing.

Where this site stands

loanloon.ca is a matching and comparison service — not a lender, a broker of record, or a credit counsellor. We do not make loans, set interest rates, or make credit decisions. The lowest rates are only available to the most qualified applicants, and the rate you are offered depends on the lender's own underwriting and on your circumstances.

This page is general information, not financial, legal or credit advice. Every borrowing decision depends on your own circumstances.

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• Financial Consumer Agency of Canada — Government of Canada
• Criminal Code s. 347 — criminal rate of interest — Justice Laws Website
• Provincial and territorial consumer regulators — Financial Consumer Agency of Canada