A line of credit is a standard borrowing option offered by most banks and credit unions in Canada, yet it still carries a surprising amount of confusion. Too many borrowers make assumptions about how it works, which often leads to misuse or missed opportunities.

Used properly, a line of credit or LOC is a flexible and cost-effective way to manage variable expenses or access funds during temporary cash flow gaps. But misinformation, especially around interest charges, repayment terms, and how it affects credit, continues to spread, even among experienced borrowers.

One example of a straightforward, flexible option is an Innovation CU line of credit, which gives you access to funds as needed, with interest charged only on what you actually use, not your full limit. Still, several myths persist, and most of them lead people to hesitate unnecessarily, or worse, misuse the credit they’ve been given. Let’s clear up the most common myths that keep people misinformed about LOC.

Myth 1: Interest Starts Accruing on the Full Limit Immediately

A LOC is not like a traditional loan. With a fixed loan, you receive a lump sum upfront and begin paying interest on the entire balance right away. A LOC works differently. You only pay interest on the amount you’ve withdrawn, not on your approved limit.

If you’re approved for $20,000 but only use $2,000, interest applies solely to that $2,000. Keeping the remaining $18,000 untouched doesn’t cost you anything. This is one of the main advantages, especially for people who want access to emergency funds but don’t want to take on new debt unless necessary.

Myth 2: Making Minimum Payments is Enough

Most lenders require a minimum monthly payment, often interest-only. Paying just that keeps your account in good standing, but it won’t reduce the principal. If you want to get out of debt, you’ll need to pay more than the interest amount.

Interest-only payments are a short-term solution. Relying on them long-term can trap you in a cycle of persistent debt, especially with higher balances. Always check your statement for the “total amount owing” and make a plan to reduce the principal over time.

Myth 3: LOCs Work Like Credit Cards

There’s some overlap in how these two work: both offer revolving credit, and both charge interest based on usage. But LOC typically come with much lower interest rates than credit cards, particularly when unsecured. Secured lines, such as those backed by home equity, come with even lower rates.

Unlike most cards, LOCs don’t come with cashback, rewards points, or purchase protection. The focus here is utility, not perks. Trying to use a LOC for frequent consumer purchases—like you would with a credit card — misses the point. It’s better suited for irregular, planned expenses like home repairs, tuition, or covering seasonal income gaps.

Myth 4: It Hurts Your Credit Score Automatically

Using a LOC responsibly can actually help your credit profile. A high limit with a low balance improves your credit utilization ratio — a key factor in your score. The same goes for making consistent, on-time payments.

Problems arise when people max out their credit lines or miss payments. Late payments get reported to credit bureaus. Using most or all of your available limit regularly can also suggest financial instability. But if managed well, a LOC won’t damage your score; it can strengthen it.

Myth 5: All LOCs Are the Same

There are two broad types: secured and unsecured. A secured LOC (like a home equity line) is backed by collateral. That usually translates into lower interest rates and higher borrowing limits. An unsecured LOC has no collateral requirement but often comes with stricter approval criteria and higher rates.

There’s also a major difference in how business and personal LOCs are structured. Business lines can come with different draw periods, repayment terms, and conditions tied to business performance. Make sure you’re applying for the type that fits your needs.

Myth 6: It’s Only Useful in Emergencies

Some people think a LOC should sit untouched until something goes wrong. That’s one way to use it—but not the only way. Many borrowers use a LOC to bridge temporary cash gaps without having to liquidate savings or investments.

It can also be used strategically. For example, covering tuition when student loans haven’t come through yet, or paying for equipment before client payments arrive. It’s a tool for planned liquidity, not just crisis response.

Summing Up

A LOC is neither risky nor complicated if you understand how it works. Most of the fear around it comes from misinterpretation. It’s not a license to overspend, but it’s also not a financial trap. Used carefully, it is one of the most flexible borrowing options available in Canada today.

CFDs, or Contract for Differences, have been a famous investment asset for some time. However, with the growing volatility in the market, its popularity has risen to a new level, particularly among risk-averse investors. Compared to trading the stocks of the company you’re interested in, investors take a speculative position and enter the market with only a fraction of the required capital. If this seems confusing, read till the end, as we break down what CFDs are and why they’re an investment of choice for beginners and risk-averse investors.

CFDs vs stocks: What are the major differences

As you might already know, stocks, also known as shares or equity, represent a portion of ownership in a company. When you buy the asset, you become a partial owner of the business and gain as much as the company value increases in relation to the amount you’ve invested.

With CFDs, investors enter a contract with a CFD broker and speculate whether the price of a company’s stock will rise going long) or fall (going short). The contract created by the broker mirrors the performance of the real asset you’re speculating on, and if the market moves in your favour, you get your profit.

5 reasons beginners choose CFDs over stocks

Flexibility Across Several Asset Classes

Contract for Differences provides the opportunity to benefit from every market condition and every asset. Whether the market is crashing or thriving, there’s a chance for you to make money. This perk is one most beginners find particularly favourable, and it’s easy to see why. Many CFD brokers offer contracts across several assets, including stocks, indices, forex, commodities, and cryptocurrencies. You get your pick of every option out there, and you work with less risk, despite raging volatility.

Leverage With Little Capital

If you want to invest $1,000 in stocks of Nvidia’s asset (NVDA), you’ll buy the equivalent of the instrument worth $1,000. With CFDs, if you’re using a 10:1 leverage, you can open a $10,000 position with your $1,000. For beginners, this is a major plus, particularly if they’re entering the market with less capital. While traditional stocks would cost more, CFDs offer a chance to control larger positions with a fraction of the capital.

No Ownership, No Hassle

The process of managing physical assets comes with its hurdles, especially for beginners. It gets more complex when you’re investing in multiple assets or also have other commitments in your portfolio. With CFDs, your focus is on the price movements and whether the market moves in your favour. You might not need to spend excessive time on technical analysis and other fundamental research that takes time. At the same time, there is no need for paperwork, dividends, custody, or transfer issues. It’s simple and fast; speculate on price movements and move on to other commitments.

Low Commission

Typically, most CFD assets come with lower commissions and fees. When trading these assets, you’re either charged through commissions or spreads. The answer to this will depend on the security you’re working with. In most cases, indices and commodities are commission-free on some trading platforms, and are strictly charged using spreads. The spread is the difference between the buy (ask) and the sell (bid) price. The bid is how much you pay if you go short, while the ask price is how much you pay to go long. If the bid and ask price for a stock is $190.00 and $190.10, the spread will be $0.10. In terms of commission, you’d find that most stock’s CFDs are charged through commission, and the amount depends on the overall value of the trade. However, one thing is sure: the fees are lower compared to several other investments.

Lower Risks

The very basis on which CFDs thrive is the advantage of avoiding risks. It particularly comes in handy in financial investment markets, considering how volatile things can get. CFDs help you spend less and position for higher reward, and could also be a great way to diversify beyond what your capital will ordinarily allow.

Better market exposure with CFDs

The investment market is fast evolving, and it’s easy to get left behind if you’re not early enough to certain opportunities. CFDs are a category of investments levelling the playing field for investors and helping them achieve more with relatively little. If you’re not considering trading these assets, this could be your sign to have a look at them, and find ways to maximize the opportunities they present.