{"id":95063,"date":"2025-07-22T15:22:28","date_gmt":"2025-07-22T19:22:28","guid":{"rendered":"https:\/\/www.rbcroyalbank.com\/en-ca\/?post_type=rbc_my_money_matter&#038;p=95063"},"modified":"2025-08-14T11:10:30","modified_gmt":"2025-08-14T15:10:30","slug":"line-of-credit-wins","status":"publish","type":"rbc_my_money_matter","link":"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/money-academy\/credit-and-borrowing\/understanding-loans\/line-of-credit-wins\/","title":{"rendered":"Avoid Credit Trouble: How to Manage Your Line of Credit Wisely"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<div class=\"wp-block-rbc-rbc-block drop-shadow pos-rel top-line-blue block-wpr\">\n<div class=\"wp-block-rbc-rbc-block-inner-block block-inner\">\n<h4 class=\"wp-block-heading\" id=\"h-tldr\">TLDR<\/h4>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>A line of credit can be a powerful financial tool, when used properly. Learn about common mistakes and how to avoid them.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>There are different types of lines of credit\u2014secured and unsecured. Understanding the differences can help you determine which one is best for you.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Using a line of credit wisely&nbsp;could&nbsp;positively affect your credit score. Find out how to use a line of credit effectively to help with your score.<\/p>\n<\/li>\n<\/ul>\n<\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>A line of credit could offer flexibility and financing when you need money to bridge a financial gap, pay for unexpected expenses, achieve important goals and more. It&nbsp;is typically a lower-interest alternative to high-interest credit cards, but it\u2019s important to use it wisely. Offering easy access to funds and flexible repayment terms, using a line of credit requires some financial discipline.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-line-of-credit\">What is a line of credit?<\/h2>\n\n\n\n<p>A&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/personal-loans\/line-of-credit.html\" data-dig-id=\"LP-95063-5089e50b\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"line of credit\" class=\"rbc-link-format\">line of credit<\/a>&nbsp;allows you to borrow money up to a set limit. You can use all or some of available credit for your financing needs \u2013 it&#8217;s there when you need it. Once you withdraw funds from your line of credit, you will be required to make minimum monthly payments. With many lines of credit, these payments cover only the interest. While these payment terms make carrying a balance easier from a cash flow perspective, it\u2019s important to also chip away at the&nbsp;borrowed amount (referred to as the principal)&nbsp;\u2013 otherwise, you could be carrying that balance indefinitely.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-secured-vs-unsecured-lines-of-credit\">Secured vs. unsecured lines of credit<\/h2>\n\n\n\n<p>Lines of credit are available in two forms:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>A secured&nbsp;line&nbsp;of credit uses an asset \u2013 such as your home or investments \u2013 as collateral. Because the lender has something to fall back on if you don\u2019t repay, they could offer lower interest rates and higher credit limits compared with other types of lines of credit.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>An unsecured line of credit is another borrowing option where you can access funds up to a set limit without using any property or assets as collateral. Because it\u2019s \u201cunsecured\u201d, lenders rely more heavily on your creditworthiness \u2013 such as credit score and income \u2013 in their approval process. An unsecured line of credit can have different eligibility terms and carry higher interest rates, but can still be useful depending on the amount you need to borrow and whether you have collateral.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-difference-between-a-line-of-credit-and-a-credit-card\">The difference between a line of credit and a credit card<\/h2>\n\n\n\n<p>Lines of credit and credit cards work similarly, as they both offer available credit to the borrower, but they also are&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/money-academy\/credit-and-borrowing\/understanding-loans\/lending-101-the-facts-about-lending-options\/?msockid=3e22f887b9446e720834ecd3b8456f01\">distinct types of lending products<\/a>.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Most credit cards have an interest rate upwards of 20 percent, while interest rates on a line of credit are typically lower.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The two can work together to help you manage your cashflow. A credit card does offer&nbsp;convenience, as you can&#8217;t use a line of credit at the cash register. With that convenience comes typically higher interest, and therefore it can cost you more&nbsp;to carry a balance. If you can\u2019t avoid carrying a balance, moving it to a line of credit can save you money in the long term. See what your line of credit payments might look like with&nbsp;<a href=\"https:\/\/apps.royalbank.com\/uaw0\/personalloans\/payment\" rel=\"noreferrer noopener\" target=\"_blank\">this calculator<\/a>.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-does-a-line-of-credit-affect-your-credit-score\">How does a line of credit affect your&nbsp;credit score? &nbsp;<\/h2>\n\n\n\n<p>What is a credit score? Your credit score is a good indicator of your financial health and reflects your ability to borrow money and repay it responsibly. It\u2019s one of the key tools that banks, credit card companies or other institutions use to determine whether you qualify for credit. The way you use your line of credit will be monitored by the two major credit bureaus in Canada, Equifax and TransUnion.<br><br>Factors that could impact your credit score include your payment history (e.g. avoiding making late payments), how much of your available credit you are using, the length of your credit history, and how frequently you are applying to new credit, among others. It\u2019s always a good idea to stay on top of your financial health and check your credit score.&nbsp;<\/p>\n\n\n\n<p>Understanding how access to credit can affect your credit score can help you stay on top of your finances. To find out what your credit score is for free, use the&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/dms\/olb\/credit-score\/index.html\">RBC Credit Check<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-mistakes-to-avoid-with-a-line-of-credit\">Mistakes to avoid with a line of credit&nbsp;<\/h2>\n\n\n\n<p>A line of credit\u00a0could\u00a0be a valuable tool in your financial toolbox and help you create\u00a0<a href=\"https:\/\/www.rbcroyalbank.com\/en-ca\/my-money-matters\/money-academy\/banking-basics\/money-mindset\/financial-fitness-strengthening-your-money-habits\/?msockid=3e22f887b9446e720834ecd3b8456f01\">sound financial habits<\/a>. It can be a flexible option for financing big purchases, such as renovations, and also to cover emergencies. But to avoid common pitfalls, here are some mistakes to avoid:\u00a0<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-blue-disc\">\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Borrowing too much.<\/strong>&nbsp;Only borrow what you can comfortably repay. Borrowing too much can put your credit at risk, as you could end up with a high balance for an extended period of time.&nbsp;When you withdraw from&nbsp;your line of credit, it is wise to have a&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/personal-loans\/cash-flow-calculator.html\">repayment plan<\/a>&nbsp;in mind.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Late payments<\/strong>. Missed payments can impact your credit score and cause your balance to&nbsp;ballon because of compounding interest. Setting up automatic payments is an easy way to make sure your minimum payment is covered on time, every time.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Maxing out your available credit<\/strong>. When the amount you borrow is a high percentage of your credit limit, it can indicate to lenders and credit organizations that you&#8217;re a high-risk borrower. Instead, keep a threshold in mind \u2013 a good rule of thumb is to borrow less than of your available credit to maintain a strong credit score.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Not checking your credit score regularly.<\/strong>&nbsp;Regularly checking your credit score is a good practice, even if you have great credit. A quick scan of your credit history can show you the health of your credit and can help you spot any fraudulent activity.&nbsp;<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p><strong>Not knowing how much interest you are paying<\/strong>. If your line of credit has a variable interest rate, the rate will rise and fall as the Bank\u2019s prime rate fluctuates. You should be able to see your current rate in&nbsp;your online banking or on your paper statement.&nbsp;<\/p>\n<\/li>\n<\/ul>\n\n\n\n<p>A line of credit can be a useful tool to help manage finances, but without some know-how, you could find yourself in unwanted credit trouble.&nbsp;<a href=\"https:\/\/www.rbcroyalbank.com\/book-an-appointment\/book-an-appointment.html\" data-dig-id=\"LP-95063-aaa52057\" data-dig-category=\"LP\" data-dig-action=\"link click\" data-dig-label=\"Continue the conversation\" class=\"rbc-link-format\">Continue the conversation<\/a>&nbsp;by booking an appointment or visiting a branch today and&nbsp;<a href=\"https:\/\/maps.rbcroyalbank.com\/\">talking to an RBC financial planner<\/a>. They can help you stay on top of your credit history and your line of credit to ensure that you are using it to your&nbsp;advantage.<\/p>\n\n\n\n<p>To&nbsp;apply for a Royal Line of Credit, call 1-866-704-7126 to speak to an RBC credit specialist or&nbsp;<a href=\"https:\/\/maps.rbcroyalbank.com\/\">visit a branch<\/a>.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-rbc-rbc-default-collapsible\"><p><button class=\"collapse-toggle collapsed\" data-target=\"#collapse834a1009\" data-toggle=\"collapse\" aria-expanded=\"false\" aria-controls=\"collapse834a1009\" data-dig-id=\"LP-95063-834a1009\" data-dig-category=\"LP\" data-dig-action=\"accordion closed\" action-closed=\"accordion closed\" action-opened=\"accordion open\" data-dig-label=\"Things our lawyers want you to know\"><span>Things our lawyers want you to know<\/span><span>Things our lawyers want you to know<\/span><\/button><\/p><div class=\"collapse-content collapse\" id=\"collapse834a1009\">\n<div class=\"wp-block-rbc-collapsible-inner-block collapse-inner\">\n<p>This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.<\/p>\n<\/div>\n<\/div><\/div>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"<p>A line of credit can be a powerful financial tool, if used properly. <\/p>\n","protected":false},"author":90,"featured_media":95065,"parent":57317,"menu_order":0,"template":"wp-custom-template-mmm-sticky-nav","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"tags":[510],"rbc_content_type":[31],"rbc_audience":[59,49,61],"rbc_lob_group":[507],"rbc_difficulty_level":[33],"rbc_mmm_category":[318,368,319,304,370],"class_list":["post-95063","rbc_my_money_matter","type-rbc_my_money_matter","status-publish","has-post-thumbnail","hentry","tag-credit-and-debt","rbc_content_type-article","rbc_audience-newcomer","rbc_audience-students","rbc_audience-youth","rbc_lob_group-loans","rbc_difficulty_level-beginner","rbc_mmm_category-banking-basics","rbc_mmm_category-banking-tips","rbc_mmm_category-credit-and-borrowing","rbc_mmm_category-money-academy","rbc_mmm_category-understanding-loans"],"acf":{"contently_publication_id":"","custom_author":"Denise O'Connell","rbc_video_header":"","rbc_media_duration":"","rbc_toc_for_mmm_tag":"h2","rbc_toc_for_mmm_limit":6,"rbc_toc_for_mmm":null,"rbc_toc_for_mmm_action":"Generate Table Of Contents"},"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<meta name=\"description\" content=\"A line of credit can be a powerful financial tool when used properly. 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