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Student Loans vs. Bank Loans

In addition to applying for government loans and grants, we recommend that students also explore the various student loans and student lines of credit options available at most major Canadian Financial Institutions.

What is a line of credit?

A line of credit is a personal loan from the bank. Unlike a regular loan for a fixed amount, the bank doesn't provide you with the full amount of the loan at once. Instead, the Bank establishes a "credit limit" for you as the maximum amount you can borrow. As you withdraw, the available credit reduces. However, as you pay the money back, the amount available for withdrawal increases. You control how much of your credit limit you want to withdraw and when.

Who is eligible to apply?

The student line of credit is designed for Canadian or Landed Immigrant students pursuing post-secondary education at an accredited/recognized post-secondary institution. Usually full-time and part-time students qualify for the line of credit, with part-time students having lower credit line maximums. Some banks even give out lines of credit for students who are studying abroad in non-Canadian institutions.

Can I have a government student loan and a bank issued student line of credit at the same time?

Yes, if you qualify.

What do I pay while I’m at school?

This will depend on the institution you bank with. Students usually only have to pay the monthly interest. After students finish their studies, banks usually allow a grace period where students only make interest payments. After the grace period expires, repayment is negotiated with the lending bank and students must start making monthly payments that include part of the principal as well as the interest. For exact details, phone the numbers listed at the bottom of the page or go in and speak with your bank representative for full details.

What is a co-signer? Do I need a co-signer?

A co-signer is a person who acts as a guarantor for a student (who may have a poor or limited credit history) in case the student is not able to pay off the line of credit. Usually a co-signer is a parent or guardian who co-signs the line of credit so that, if the student is unable to make payments, the co-signer will take over and pay the balances. Most banks require co-signers for undergraduate students, but usually not for graduate students.

Student Line of Credit vs. Government Student Loans (Full-time funding)

Student Line of Credit

Government Student Loans

 

Amount of Assistance

Ranges from $5000 to $8000 a year depending on the bank- more funding is available for professional programs

Maximum loans for an 8 month academic year is $13,300 - more funding is available for higher cost programs and professional programs

Interest payments while in school

Yes

No, as long as the student is registered in full-time studies

Interest Rate

Varies depending on financial institution

Prime + 2.5% for Canada Student Loans
Prime + 1% for Ontario Student Loans

Co-signer required

Usually for undergraduates, usually not required for graduate students

No

Repayment Assistance

No

Yes - Remission, Interest relief, etc.

Other funding programs

Not automatically considered for any assistance programs

Automatically assessed for government bursaries and grants

Student Line of Credit vs. Government Student Loans (Part-time funding)

Student Line of Credit

Government Student Loans

 

Amount of Assistance

Ranges from $5000 to $8000 a year depending on the bank- more funding is available for professional programs

Only covers educational expenses - to a lifetime accumulated 'oustanding' limit of $10, 000

Interest payments while in school

Yes

No payments are necessary while registered as a student, however interest is accumulating during this time period

Interest Rate

Varies depending on financial institution

Prime + 2.5% for Canada Student Loans
Prime + 1% for Ontario Student Loans

Co-signer required

Usually for undergraduates, usually not required for graduate students

No

Repayment Assistance

No

Yes - Interest relief, etc.

Other funding programs

Not automatically considered for any assistance programs

Automatically assessed for government bursaries and grants


For your convenience, the names and websites of most major Canadian Financial Institutions have been listed below:

Alterna Savings 

Bank of Montreal

CIBC

HSBC

Laurentian Bank

National Bank of Canada

Royal Bank of Canada

Scotiabank

TD Canada Trust