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Here’s a high-level comparison of Personal Loans and Line of Credit:
| Feature | Personal Loan | Line of Credit |
|---|---|---|
| Best for | Large, one-time expense (e.g., used car purchase or debt consolidation) | Ongoing needs (e.g., emergencies, renovation projects) |
| Borrowing Structure | Lump sum borrowed upfront | Flexible access up to an approved credit limit |
| Repayment | Fixed payments over a set term (e.g., 1-5 years) | Option to pay interest only on borrowed amount |
| Interest | Interest and principal payments made over a set term | Interest charged only on money borrowed, pay interest monthly and principal at your own pace |
| Reusability | One-time use; reapply to borrow again | Ongoing access to credit line as balance is repaid |
If you have questions or need help deciding which option is right for you, connect with an RBC credit specialist.
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Loan Payment Calculator FAQs
Personal Loan
For a fixed rate or variable rate RBC personal loan, you can make payments monthly, semi-monthly, bi-weekly or weekly. You can also set up recurring payments and make changes to your payment amount, schedule and due date through RBC Online Banking. You can also pay off the entire balance without penalty.
Line of Credit
You must make a minimum payment each month that covers, the interest on money borrowed and any insurance premiums, if applicable. You can also set up a fixed repayment amount on a recurring schedule, whether that’s monthly, semi-monthly, bi-weekly or weekly, to pay down your balance. And, at any time, you can also pay off the entire balance without penalty.
Personal Loan
Interest on a personal loan is charged on the whole amount you borrow (the principal) from the day you borrow it. The interest is usually calculated daily on your outstanding principal balance. Here’s how it works:
- Calculate the daily interest rate using your specific annual interest rate (AIR) divided by 365.
- Calculate the daily interest amount using your current outstanding loan balance x the daily interest rate (above).
- Calculate the monthly interest by multiplying the daily interest x number of days in the billing cycle (e.g. 30 days).
With a personal loan, you pay a fixed monthly payment. Your payment that month first covers the interest calculated above, and the remainder of the payment reduces your principal balance
Line of Credit
Interest on a line of credit is only charged on the amount you actually use (not your full approved credit limit). The interest is usually calculated daily on your outstanding balance—and charged to you monthly. Here’s how it works:
- Calculate the daily interest rate using your specific annual interest rate (AIR) divided by 365.
- Calculate the daily interest amount using your outstanding credit line balance x the daily interest rate (above).
- Calculate the monthly interest by multiplying the daily interest x number of days in the billing cycle (e.g. 30 days).
Your monthly statement will then outline the total accrued interest that month and the minimum payment due. Usually, your minimum payment goes toward interest only—until you choose to repay the principal you borrowed.
A fixed rate loan, the interest rate is locked in, meaning it stays the same for the entire loan term. This gives you predictable, stable payments throughout the life of your loan. You can switch an RBC fixed rate loan to a variable rate loan—or pre-pay at any time without penalty.
With a variable rate loan, the interest rate fluctuates based on changes in the RBC Prime Rate (opens modal window), meaning your interest costs can rise and fall over time, which can impact your amortization term (length of time it takes to repay):
- If interest rates rise, your payments will likely stay the same, but your amortization term will increase.
- If interest rates fall, your payments will stay the same and your amortization term will decrease, meaning you could pay off your loan sooner.
You can switch your RBC variable rate loan to a fixed rate loan—or pre-pay at any time without penalty.
Here’s a high-level look at some of the differences between fixed and variable rate loans.
| Feature | Fixed Rate Loan | Variable Rate Loan |
|---|---|---|
| Interest Rate | Locked in for the duration of your term | Will rise and fall with changes in the RBC Prime Rate |
| Monthly Payments | Stable and predictable | May change (or your amortization term will change) |
| Potential Savings | Less opportunity to save if rates drop (rate is locked in) | More opportunity to save if rates drop |
| Risk Level | Lower risk (protected from rate spikes) | Higher risk (exposed to rate spikes) |
| Best For | Borrowers who want the stability of fixed payments and no rate fluctuations | Borrowers who want flexibility and feel comfortable with rate changes |
Your payment frequency directly impacts the total interest you will pay over the life of your loan. Making more frequent payments—such as weekly or bi-weekly rather than monthly—can reduce the total interest you pay. This approach can also shorten your amortization (length of time it takes to repay) if your payments equal one or more extra monthly payments per year.
Yes, you can pay off an RBC personal loan in full without penalty and close your account at any time through RBC Online Banking, Branch Advisor or by calling an advisor at 1-800-769-2511
A personal loan can be a good choice if you want to make even predictable payments over a fixed timeframe. A personal loan can come with a fixed or a variable interest rate.
A line of credit gives you access to funds up to your approved credit limit. You only incur interest when it's used, and you have the option to make interest-only payments. As you repay what you've borrowed, that money becomes available to you again. A line of credit can come with a fixed or a variable interest rate.
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Royal Bank of Canada does not make any express or implied warranties or representations with respect to any information or results in connection with the calculator. Royal Bank of Canada will not be liable for any losses or damages arising from any errors or omissions in any information or results, or any action or decision made by you in reliance on any information or results.
LoanProtector insurance coverage is optional and is governed by the terms and conditions of group’s creditor policies, #G28444 for life insurance, #H28544 for critical illness insurance and #H28445 for disability insurance, issued to Royal Bank of Canada by The Canada Life Assurance Company.
Prime Rate
"RBC Prime Rate" means the annual rate of interest announced by Royal Bank of Canada from time to time as its reference rate then in effect for determining interest rates on Canadian dollar commercial loans made by the Bank in Canada. The current Royal Bank Prime Rate may be viewed here, and is subject to change at any time without notice. On October 30, 2025, the Royal Bank Prime Rate was 4.450%.