I know someone who has a personal line of credit whose interest rate is prime+2.5%. The “prime” refers to the bank’s prime interest rate. Most banks in Canada have prime at 4.75% right now. So his interest rate is currently 7.25% compounded monthly, which works out to 7.50% annually.
What I was curious about is how this rate compares to other unsecured lines of credit. So, I started poking around online to find out. But, it seems that this is a big secret. Every bank and other type of financial institution I checked just said that the amount over prime depends on “personal circumstances”.
I understand that the interest rate will depend on income, credit history, borrowing limit, and possibly other factors. However, the lack of available information about what is a good rate and what is a poor rate makes it difficult for consumers to find a good deal.
With mortgages, at least you can see the starting point for negotiation with each institution (see CanadaMortgage, for example). For unsecured lines of credit, there seems to be just a black hole.
The only data points I have right now are prime+2.5% for the person I know, and the prime+1.5% for the line of credit I had a long time ago. If any readers can add to this, I’d like to hear about it. Let me know about any online sources of information, or just let me know what rate you have.