Unsecured lines of credit are an excellent way to fund a business because of three things:

• Low interest rates: The interest rate on an unsecured line of credit is much lower than the interest rate on a credit card as well as other types of loans (even some commercial loans).

• Flexibility: You can use the line of credit for any purpose that you want. You can even withdraw money in cash from that line of credit, and the interest rate will remain the same (unlike credit cards). Additionally, you can re-withdraw money that you’ve already credited to your line of credit immediately!

• Low monthly payments: Some banks have a special plan where your minimum payment on the unsecured line of credit is the monthly interest. For example, if the interest rate on your unsecured line of credit is 6.5% and you have $10,000 in debt in your line of credit, then your minimum payment is about $55.20 in a 31 day month. Note that most banks have a minimum payment of 3% of your total debt in your line of credit every month. So, in the latter case, for a debt of $10,000 you will have to pay $333.33 every month.

So, what is the current unsecured line of credit interest rate in Canada?

The answer is: it depends. It depends on your profile with the bank, and the risk that you post to the bank. Low risk clients can have a rate as low as 4%! Most clients have a rate of 5.5% to 8.5%. High risk clients can have a rate as high as 10%. So, if your line of credit has an interest rate higher than 10% and you see yourself as a low risk client, then you must start thinking about switching banks!

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