Secured Line of Credit – HELOCs, A Homeowner’s Safety Net

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Having the ability to leverage cash flow is crucial in today’s economy. With job closures, layoffs and all of life’s unforeseen circumstances, a secured line of credit can make the world of difference.

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In today’s economy, financial challenges and bad credit are almost commonplace.

According to the January 2022 Labour Force Survey, job absences due to illness or disability reached record highs in Canada. The unemployment rate increased for the first time in nine months.

Having the ability to borrow money is crucial. With job closures, layoffs, and life’s unforeseen circumstances, access to a credit line can make a world of difference.

For homeowners, a homeowners line of credit can provide the financial means to get through these challenging times.

If you’re a homeowner with bad credit who has been turned down for a line of credit by your bank, here’s what you need to know to get a HELOC with your less-than-perfect credit.

The real estate agent discusses the terms of the home purchase contract - line of credit mortgage

What Is a Secured Line of Credit in Canada?

With a line of credit, you can borrow money up to a pre-set limit determined by the lender. Although many borrowers use the funds to consolidate debt, the funds don’t have to be used for a specific purpose. You can use as little or as much of the line of credit as you need up to the maximum.

Banks offer two types of lines of credit (LOC), secured and unsecured.

While a secured LOC is typically a better option for people with poor credit, understanding the difference between and the options available for each loan type can help you better communicate your loan needs to a mortgage broker or lender.

What Is the Difference Between a Secured and an Unsecured Line of Credit?

The most significant difference between a secured and unsecured line of credit is collateral. It is collateral that determines whether the loan risk is placed with the lender or borrower.

Unsecured Line of Credit

Unsecured LOCs do not require the borrower to put up any collateral to get the loan. Without collateral to secure the loan, lenders take on considerable risk, so traditional financial institutions typically don’t offer unsecured lines of credit to anyone with a credit score below 740. Examples of unsecured loans include credit cards and personal loans.

An unsecured line of credit:

  • Usually comes with smaller limits, higher monthly payments, and higher (sometimes much higher) interest rates since collateral is not required
  • Are typically harder to get, especially for those with bad credit since the lender has no compensation if the borrower defaults
  • May require a co-signer if your credit score is low

Payday and peer-to-peer lenders will lend to those with bad credit without collateral, but these loan types are typically the most expensive way to borrow money.

Secured Line of Credit

secured LOC is guaranteed by collateral, in many cases a home or car. The borrower assumes most of the risk with a secured LOC since they could lose their collateral to the lender if they cannot repay the loan.

A secured line of credit:

  • Usually comes with a lower interest rate and higher credit limit than unsecured LOCs
  • Often have a lower monthly minimum payment
  • Typically are the most affordable way to borrow money
  • Available to those with lower credit scores since the borrower puts up collateral

Homeowners can get a secure LOC through home equity financing.

Making real estate deal, handshake with agent -

What Is the Difference Between a Home Equity Loan and a Home Equity Line of Credit?

Home equity financing provides two main options for homeowners: a home equity loan and a home equity line of credit (HELOC). These loans do not impact an existing first mortgage, and approvals are based on the amount of equity accumulated in the home.

Home Equity Loan

home equity loan allows you to apply for and borrow one lump sum of money. Depending on the loan terms, a home equity loan is repaid at a fixed interest rate in regular installments over 10 to 30 years.

Unlike a HELOC, you cannot “re-borrow” money paid back to a home equity loan.

Home Equity Line of Credit (HELOC)

A home equity line of credit lets you borrow what you need as you need it up to the total amount approved by the lender.

Most HELOCs allow you to access or “draw on” the funds for a 5- to 10- year period. After this time, any outstanding balance is paid back in installments over 10 to 20 years unless the lender requires payment in full (referred to as a balloon payment).

A home equity line of credit offers adjustable interest rates and interest-only payments. They provide much more flexibility than a home equity loan and are a better option if you need to borrow money for debt consolidation.

Working with a mortgage broker specializing in HELOCs for bad credit is the best way to improve your chances of qualifying if you have poor credit. provides home equity loans for people in Canada with bad credit who other lenders have turned away due to credit or income limitations. Apply online today for a no-obligation quote.

Generic version of a home equity line of credit (HELOC) application form

What Are the Benefits of a Secured Line of Credit in Canada?

A HELOC is an excellent option for cash-strapped homeowners and those needing to reduce higher interest debt. Moreover, they can provide access to cash when needed, often at the lowest rate possible. They are a much cheaper alternative to personal lines of credit or unsecured loans.

The best part about a home equity line of credit is that you only pay what you owe plus the monthly interest. You can put as much towards the loan principal as you want, whether making minimum payments or paying a large lump sum.

HELOCs have terms and conditions similar to credit cards. They come with an access card, and you can link to your checking account for convenience. They are a form of revolving credit without a nosebleed interest rate.

As with a credit card, you can monitor a HELOC via online banking and reuse the amount you have paid down at any time.

You can use HELOCs for just about anything. In fact, with a HELOC, you can:

  • Consolidate high-interest credit cards and loans
  • Pay for home renovations
  • Prepare for unexpected expenses
  • Cover education costs
  • Rebuild your credit

HELOCs are flexible and cost-effective, whereas personal and other unsecured loans are rigid and expensive. They are perhaps one of the best products a homeowner can have. The challenge with a HELOC is figuring out how to secure one, especially if you have bad credit.

Thankfully, some lenders focus more on the equity in your home than your income or credit score. can connect you with these lenders. Call today at 1-855-668-3074.

mortgage application approved

Is It Difficult to Get a Secured Line of Credit in Canada?

While secured credit lines are a terrific option, it is harder to borrow against the equity in your home due to new government rules, forcing big banks to scrutinize your income and credit.

Before approving a home equity line of credit, a lender often requires a borrower to have a sufficient and stable source of income, an acceptable income to debt ratio, and an acceptable credit score.

So what credit score is needed for a line of credit in Canada? The best interest rates go to those with a credit score of 680 or above. The lower your credit score, the higher the interest rate, and the harder it is to find an institution willing to lend.

To borrow from one of the big banks, high-risk borrowers typically have to either get a co-signer or wait until their credit improves, which can be a challenge for those already struggling financially.

Can You Get a Secured Line of Credit with Bad Credit in Canada?

If you have bad credit, you may have been turned down by a major bank for a line of credit. Taking the following steps can help increase your chances of qualifying for a HELOC with another lender:

  1. Order your credit report. You can obtain a free copy of your credit report from the Financial Consumer Agency of Canada website. Knowing your credit score can help when speaking with mortgage brokers and lenders.
  2. Correct any errors on your credit report. It is not uncommon for credit reports to contain errors that hurt your credit score. Correcting credit report errors may not raise a low credit score by much but certainly can’t hurt.
  3. Determine how much you can borrow. To find out how much equity you have in your home, subtract any existing mortgages or liens from the estimated current value of your property. Then use this home equity calculator to determine how much you’re eligible to borrow.
  4. Contact a mortgage broker who matches borrowers who big banks have turned down with lenders that work with poor credit. They help clients secure HELOCs with poor credit; they can also get you the best possible rate.

Secured Lines of Credit Ontario – Bad Credit

Fortunately for homeowners, a number of lenders work with poor credit and are often willing to overlook credit issues where a homeowner has equity. Having a skilled mortgage broker on your side can mean the difference between approval or being turned away. has been helping clients secure financing for over 30 years. We pride ourselves on arranging the best rates and flexible terms, even if your credit history isn’t perfect.

Let provide you with peace of mind. If your application for a HELOC has been turned away by your financial institution, contact us today at 1-855-668-3074 or apply online and get a no-obligation quote.

The lenders we work with serve all of Canada and have service locations in Whitby, Oshawa, Ajax, Bowmanville, Courtice, Pickering, and Newcastle.

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