Line of Credit vs Loan Calculator
This calculator compares the interest on an interest-only line of credit with an amortised instalment loan of the same size. Enter your own amounts and rates — the defaults are examples, not a quote.
How this calculator works
A line of credit is revolving: you pay interest on the outstanding balance and can repay and redraw. An instalment loan is fixed: equal payments that clear the balance by a set date. This calculator compares the interest on each over the period you enter.
Formula: line-of-credit interest is amount × (locRatePct ÷ 100 ÷ 12) × locMonths, which assumes you pay interest only and repay the principal at the end. Instalment interest comes from the amortised payment P × r / (1 − (1 + r)^−n), multiplied by the number of payments and reduced by the principal.
The comparison is not only about rate. A line of credit usually has a lower rate, but if you only pay interest the balance never falls and the debt can stay open for years. An instalment loan often has a higher rate but a fixed end date, which forces the balance down.
Lines of credit are often variable-rate, so the cost moves with the lender's prime rate. Some are secured against your home, which lowers the rate but puts the asset at risk if you default. An instalment loan may be unsecured and therefore priced higher.
This is an illustration using the numbers you enter. The best choice depends on whether you value flexibility or a guaranteed payoff date, and on the rate you are actually offered. Compare the total cost, not just the monthly payment.
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Frequently Asked Questions
Why is the line of credit usually cheaper?
Lines of credit often carry a lower rate, especially when secured, and you pay interest only on what you draw. But interest-only payments never reduce the balance.
Which one should I choose?
Choose a line of credit for flexible, short-term gaps you can repay quickly. Choose an instalment loan when you want a fixed payment and a guaranteed payoff date.
Are lines of credit variable-rate?
Many are tied to the lender's prime rate, so the cost can rise or fall. Some instalment loans are fixed for the whole term.
What if I only pay interest on a line of credit?
The balance stays the same and the debt can continue indefinitely. This calculator models that interest-only scenario for the line of credit.
Last updated: September 16, 2026 · By the Instalment.ca Editorial Team
We research Canadian lending rules and update these pages when the law, the data, or the available offers change. We are not a lender and we do not provide personal financial advice.
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This is general information, not financial, legal, or tax advice.
Rates and terms vary by lender, creditworthiness, and province. Figures shown are examples only.