How to Compare Line of Credit Rates in Canada


Canadian consumer financing is similar to consumer lending in the United States. Lenders in both countries use a credit rating system to determine credit worthiness, both look at income and employment prior to offering financing, and both use debt ratios and proprietary guidelines when figuring interest, fees, and rates. If you are seeking a line of credit in Canada, though, there are a few differences between the U.S. and Canada system.

Things You'll Need

  • Income documents
  • Pull a copy of your Canadian credit bureau, if available. Unlike the U.S., Canada does not have a state-sponsored website for free credit reports. You can get a free copy from one of the three major bureaus---TransUnion, Experian and Equifax---but you'll need to get it mailed. However, you can pay to view a copy of your report online. This will help you determine your creditworthiness.

  • Calculate your Debt Service Ratio (DSR). In the U.S., this ratio is called the Debt to Income ratio (DIR). It is roughly the same. To calculate, divide the total of your monthly bills by your total gross monthly income and multiply by 100. Most Canadian lenders want to see a DSR below 45 percent.

  • Research the Prime Rate in Canada. Many lines of credit (especially home loans) in Canada are based on this rate. This is different than the U.S. Prime Rate. The lower the Prime Rate, the better your chances of getting a favorable credit line.

  • Apply at banks and finance companies where you currently do business. Unlike the U.S., Canadian lending businesses place a high premium on previous business. Therefore, you may qualify for a lower interest credit line at your current bank even though you may have some credit or income problems.

  • Look for adjustable, variable, and fixed interest rates on Canadian credit lines. The loan you choose should ultimately reflect your financial goals. The best way to find the most advantageous loan is to review many options. In Canada, there are an inordinate number of interest rates from which to choose.

  • Talk to your Canadian loan officers are discount points. Some lenders will let you reduce the rate on your credit line by paying higher fees up-front. This is usually a fiscally sound decision---especially if you intend to hold the credit line for a long period of time.

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