Two popular products. One important decision.
We'll help you figure out exactly which one fits your situation — and then match you with the right lender in minutes.
If you've ever sat down to Google "how to borrow money in Canada," you've probably noticed two options keep appearing side by side: the personal loan and the line of credit. They sound similar. They both let you borrow money. They both charge interest. So what's actually the difference — and which one should you choose?
The honest answer: it depends entirely on what you're borrowing for. Choose wrong and you'll either pay more interest than you need to, or lock yourself into a rigid repayment structure that doesn't match how you actually spend. Choose right, and borrowing becomes a financial tool rather than a financial burden.
At Smarter Loans, our technology evaluates your profile and matches you to the right product and the right lender simultaneously — from a network of 50+ verified Canadian lenders. But first, let's make sure you understand the difference.
Personal Loan
Borrow a fixed lump sum. Repay in equal monthly installments. Fixed end date. Predictable from day one.
Line of Credit
Access a revolving credit limit. Draw what you need, when you need it. Pay interest only on what you use.
$150K Loan and credit line amounts available
What Is a Personal Loan?
A personal loan is a one-time, fixed-amount loan repaid in equal monthly installments over a set term — typically 6 to 84 months. You receive the money upfront, spend it as needed, and repay it on a predictable schedule.
Most personal loans in Canada carry a fixed interest rate, meaning your payment never changes. You always know exactly what you owe, when you owe it, and when you'll be done.
Common Uses for Personal Loans
- Consolidating high-interest credit card debt into one lower payment — see our guide: How to Get a Personal Loan in Canada with Bad Credit
- Home renovations or major repairs
- Medical or dental expenses
- Weddings, moving costs, or major life events
- Buying a used vehicle privately
- Covering a large, defined expense where you know the exact amount
What Is a Line of Credit?
A line of credit (LOC) is a revolving credit facility — think of it like a pre-approved pool of money you can dip into whenever you need it, up to your approved limit. You draw funds when needed, repay what you've used, and the available credit resets. You only pay interest on the balance you've actually drawn.
Lines of credit can be secured (backed by your home or other assets, like a HELOC) or unsecured (no collateral required, but typically higher rates). Most personal lines of credit in Canada come with variable interest rates tied to the prime rate.
Common Uses for Lines of Credit
- Managing irregular income or business cash flow
- Ongoing home renovation projects where costs trickle in over time
- Emergency fund backup for unexpected expenses
- Covering gaps between paycheques or contract payments
- Short-term borrowing that you'll repay quickly
Personal Loan vs. Line of Credit: Full Comparison
| Feature | Personal Loan | Line of Credit | Better For |
|---|---|---|---|
| Structure | Lump sum, repaid over fixed term | Revolving — borrow, repay, repeat | Depends on use |
| Interest Rate | Usually fixed (9.99%–34.99%) | Usually variable (prime + margin) | Personal Loan |
| Payment | Fixed monthly installments | Interest-only minimum; flexible | Personal Loan |
| Predictability | High — same payment every month | Low — fluctuates with balance & rate | Personal Loan |
| Flexibility | Low — fixed amount upfront | High — draw what you need | Line of Credit |
| Interest Paid | On full amount from day one | Only on amount drawn | Line of Credit |
| Payoff Date | Fixed — you know exactly when | Open-ended — no required end date | Personal Loan |
| Credit Score Impact | Positive with on-time payments | Positive if utilization stays low | Similar |
| Best For | Defined, one-time expenses | Ongoing or unpredictable needs | Depends on use |
| Availability on Smarter Loans | ✔ 50+ lender partners | ✔ Multiple lender partners | Both available |
🧭 Which One Is Right for You?
Answer 3 quick questions and we'll give you a personalised recommendation.
Not sure which product is right for you?
Apply once through Smarter Loans. Our technology evaluates your profile and surfaces the right product from the right lender — automatically. Free, fast, and no impact on your credit to browse.
See My Matched Options →How Much Will Each Option Actually Cost You?
Interest rates only tell part of the story. The true cost depends on how much you borrow, your rate, and how quickly you repay. Use this calculator to compare the real numbers side by side.
💰 Real Cost Calculator
Compare your total interest paid under each product.
* Line of credit estimate assumes full balance drawn immediately and repaid in equal installments over the selected term. Actual LOC costs vary depending on draw behaviour. Rates shown are illustrative — your actual rate depends on your credit profile.
Which Option Wins for Your Situation?
No single product is universally better. Here's how they stack up across the most common Canadian borrowing scenarios:
Paying Off Credit Card Debt
You have a defined balance to eliminate at a lower rate.
✔ Personal Loan WinsPhased Home Renovation
Costs arrive in stages over several months — you don't need it all at once.
✔ Line of Credit WinsBuying a Used Car
Fixed purchase price, straightforward repayment. Predictability preferred.
✔ Personal Loan WinsEmergency Fund Backup
You need access to funds just in case — not necessarily to spend now.
✔ Line of Credit WinsWedding or Major Event
Known cost, one-time expense, clear repayment goal.
✔ Personal Loan WinsFreelancer / Irregular Income
You need to cover gaps between contracts — variable draw amounts make sense.
✔ Line of Credit WinsPros & Cons Side by Side
Personal Loan
✅ Pros
- Fixed rate — protected from rate hikes
- Predictable payments — easy to budget
- Clear payoff date — you know when you're done
- Great for debt consolidation
- Builds credit steadily with on-time payments
❌ Cons
- You pay interest on the full amount immediately
- No flexibility once the loan is issued
- Early repayment penalties with some lenders
- Not ideal for variable or ongoing spending
Line of Credit
✅ Pros
- Only pay interest on what you draw
- Reusable — pay down and borrow again
- Flexible for variable or unpredictable needs
- Great as a financial safety net
❌ Cons
- Variable rate — payment can increase if rates rise
- No fixed end date — easy to carry a balance indefinitely
- Requires discipline not to over-draw
- Minimum payments may only cover interest
Why Smarter Loans Is the Smartest Place to Get Either Product
Whether you've decided on a personal loan or a line of credit, the next challenge is finding a lender who will approve you — at the best rate available for your profile. That's where most Canadians lose time, money, and credit score points by applying to multiple lenders individually.
Smarter Loans solves this with proprietary matching technology that:
- Evaluates your full profile — not just your credit score, but income, employment, and debt-to-income ratio
- Matches you in real time against the actual underwriting criteria of 50+ verified lenders
- Routes you to lenders most likely to approve you — protecting your credit score from unnecessary hard inquiries
- Surfaces your best rate — because different lenders price risk differently, and the first offer is rarely the best
- Works for all credit ranges — from excellent (725+) to fair (560+) and even poor credit situations
You don't need to decide between a personal loan and a line of credit before applying. Tell us what you're trying to accomplish — our platform will surface the most suitable options from both product types, and you choose what works best.
Apply once. Get matched to 50+ lenders. Find your best rate.
Whether it's a personal loan or a line of credit, Smarter Loans finds the right fit for your situation — fast, free, and without playing games with your credit score.
Find My Best Option Today →Frequently Asked Questions
The Bottom Line
Personal loans and lines of credit are both useful tools — the right choice simply comes down to your specific situation. If you need a defined amount for a clear purpose and want predictable, structured repayment, a personal loan is your best bet. If your needs are ongoing, variable, or you want a financial safety net, a line of credit gives you the flexibility you need.
What you shouldn't do is pick the wrong product just because it was the first one a bank offered you. And you definitely shouldn't apply to multiple lenders separately and rack up hard inquiries while searching for a good rate.
Apply once through Smarter Loans, and our platform will match you to the right product, with the right lender, at the best available rate for your profile. Over 2 million Canadians have trusted us since 2016 — and our technology gets smarter every day.
Ready to find your best borrowing option?
One application. 50+ lenders. The right product for your situation — matched by technology, not guesswork.
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