Advantages of Secured Line of Credit in Canada

A secured line of credit is when you get the approval for a line of credit from a lender against an asset in the form of a fixed amount of money. It basically means that you are availing of a secured line of credit against a possession such as a car or real estate asset. These assets work as collateral and in case the borrower defaults on their repayment, the lender can repossess the collateral.  

Whether you are seeking a secured line of credit for an investment purpose, a property purchase, or a one-time expense in Canada, talking to experts like Alpine Credits can help you calculate the loan amount, type, and tenure. They can also help you understand the basic difference between a home equity line of credit and a mortgage in Canada.

A secured line of credit resembles a credit card in many ways such as: 

  • You can borrow only a specific amount against your limit
  • You can use it for your own needs and purposes
  • You are in a position to decide the onset and end date of the payment terms
  • The more balance you pay off, the more loan amount you are free to borrow again

Advantages of a Secured Line of Credit

Here are 5 reasons why a secured line of credit in Canada should get your nod:

1. Multiple Uses of a Secured Line of Credit

       A personally secured line of credit can be used for anything and everything. After understanding the interest rates and flexible repayment options, you can use a personal line of credit for either of the following:

        It can be used for tasks that have funding challenges such as home improvement projects, which you’ve been wanting to pursue for a long time.

         It works as a boon for people with irregular incomes as it allows you to pay the regular monthly bills until the next commissioned paycheck is on its way.

         It can help with emergencies too, such as paying tax and credit card bills, and college tuition fees. 

         It can also work as a backup when you need overdraft protection.

It serves as a financial boost in case you want to invest in a new business opportunity or want to upgrade your existing business via additional funds.

2. Lower Interest Rates

A secured line of credit often has a lower interest rate, which makes it all the more lucrative. This is primarily because lenders tend to calculate interest rates based on the risk factors involved. 

Since an asset typically supports a secured line of credit, the lender lowers his risk resulting in a more affordable interest rate.

3. Continuous Access To Money 

In case you want money for a substantial expense but you’re not sure which home equity line of credit to opt for, then a secured line of credit will be your best bet. Unlike in a personal loan scenario, you do not need to receive a lump sum of money with a secured line of credit. 

You can instead divide the inflow of money into parts stretched over a set period of time. The best part about a secured line of credit is that you don’t need to start paying the interest until you actually borrow the amount. 

For example, if you want to just renovate your kitchen and master bedroom (and not the entire house), then opting for a secured line of credit would be wise because you can draw money for the project in phases as per your credit limit.

4. Lower Credit Scores Are Acceptable 

When applying for finances, business owners and entrepreneurs with poor credit scores often tend to face many challenges. In such a circumstance, choose a secured line of credit as it has relatively lower risks associated with it. 

When assigning a loan, lenders need to know about your credit history only because they want to understand your likeliness to repay a loan. In the case of giving a secured line of credit, lenders tend to look at collaterals instead, which lowers their risk considerably.

Since the borrower doesn’t want to lose out on the asset tagged along with the secured line of credit, he is more likely to do his best to repay the loan. Also, the interest rates for a secured line of credit are going to be considerably lower than an unsecured line of credit. 

5. Spread the Payment Over a Longer Period of Time

Secured loans tend to spread the cost over several months or years, which makes the repayments more affordable. This all depends on the collateral you can offer against the secured line of credit. For lenders, lower risk means that they’ll offer longer loan repayment terms.

In some cases, the lender can even stretch the repayment tenure to up to ten years. This is because when the property is kept under possession as a secured loan, lenders tend to count upon the increasing property prices against the increased value of the collateral. 

This also means that instead of dividing several payment installments among different lenders, the borrower needs to make just one payment every month.


A secured line of credit works best only when you have a solid asset to pledge such as a house or a car, or if you have a stable income and you know you’d be able to repay the loan. Choose a secured line of credit only if you have greater financial flexibility backed with other saving options. 

Before seeking a secured credit loan, you must also thoroughly calculate your repayments, along with understanding fixed and variable rates. Also, ensure that the monthly repayment scheme fits into your budget so that you’re able to maintain your financial health.

Share the joy