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Can't Keep Up With Your Line of Credit Payments? Options for Albertans
Updated: Oct 30
A line of credit can help cover unexpected expenses, home repairs, or other costs. However, rising interest rates or a growing balance can make repayment harder to manage. What once seemed like a convenient way to borrow can become a source of ongoing financial pressure.
For Albertans who rely on a line of credit or home equity line of credit (HELOC), higher borrowing costs can leave less money available for household expenses. If your payments are barely reducing the balance, reviewing your debt-relief options can help you decide how to move forward.
Why Can Line of Credit Debt Become Hard to Repay?
A line of credit allows you to borrow up to an approved limit and generally charges interest on the amount you use. If interest rates rise, your income changes, or unexpected expenses arise, keeping up with payments can become more challenging. Depending on your agreement, the minimum payment may cover only interest. Paying only that amount will not reduce the principal you owe.
You may be struggling with LOC payments if you are:
Making regular payments but seeing little change in the balance
Reaching your credit limit or relying on additional borrowing
Using credit to cover everyday expenses
Falling behind on other bills
Finding that debt payments leave little room in your budget
Reviewing your income, expenses, and outstanding balances can help you determine whether your current repayment plan is sustainable.
What Should You Do If You Are Falling Behind on Your LOC Payments?
Contacting your lender early can help you understand whether any payment arrangements or other measures are available. Ask about the terms and any potential fees before agreeing to a change.
It is also important to avoid relying on additional borrowing to cover existing payments if this is causing your total debt to grow. If your budget cannot cover your essential expenses and debt payments, a broader review of your finances may help you understand what is manageable and which relief options are worth considering.
If you have already missed payments and are receiving collection calls or letters, read SCB’s guide on how to deal with debt collection agencies to learn more about the process and your rights.
What Are Your Options for Managing Line of Credit Debt?
The right approach depends on your income, the amount you owe, your interest rate, and whether your line of credit is secured against an asset. Here are some approaches to consider.
Debt Counselling
Debt counselling can help you review your budget, organize payments, and develop a realistic repayment plan. It may be helpful if you can repay what you owe but need support managing expenses and prioritizing debts.
SCB Debt Solutions’ debt counselling services can help you assess your financial obligations and consider a manageable way forward.
Debt Consolidation
Debt consolidation combines multiple debts into one payment, through a new loan or credit product. Depending on the interest rate and terms, it may simplify repayment or reduce borrowing costs.
However, approval may depend on your income, credit history, and other factors. Consolidation also does not eliminate your debt. You remain responsible for repaying the new loan, and borrowing more without addressing the underlying budget shortfall could leave you with further debt.
Our guide to debt consolidation in Alberta explains the potential benefits and limitations. You can also read about other debt relief options in Alberta to understand which approaches may be worth exploring.
Can a Consumer Proposal Help With Line of Credit Debt?
If your payments are no longer affordable, a consumer proposal may be another option to consider.
A consumer proposal is a formal legal process under Canada's Bankruptcy and Insolvency Act. It allows an eligible individual to offer creditors repayment of a portion of their unsecured debts, extend the repayment period, or both. The proposal must be accepted or deemed accepted by creditors and approved or deemed approved by the court. Its term cannot exceed five years.
An unsecured line of credit can generally be included in a consumer proposal. Filing a proposal triggers a stay of proceedings that stops most collection action on the unsecured debts covered by it, subject to legal exceptions.
A proposal must be affordable for you and acceptable to your creditors. It is not the right fit for everyone, so it is important to understand the requirements and potential effects before proceeding.
What If Your Line of Credit Is Secured Against Your Home?
A HELOC uses your home as security, which makes it different from an unsecured line of credit. If you are researching HELOC relief options, understanding this distinction is important.
Falling behind on a secured line of credit can have consequences beyond missed payments. Depending on your loan agreement and the circumstances, the lender may have legal rights to pursue enforcement against the property. A consumer proposal does not automatically change the terms of a secured debt or remove the lender's rights over your home.
Before deciding how to handle overdue HELOC payments, review your loan agreement and seek professional advice about the risks and available approaches.
Unsecured Line of Credit vs HELOC
Feature | Unsecured Line of Credit | Home Equity Line of Credit (HELOC) |
|---|---|---|
Security | Not secured against your home or other specific assets | Secured against your home |
Eligibility | Based largely on income, credit history, and ability to repay | Based on income, credit history, home equity, and lender requirements |
Borrowing limit | Usually lower, depending on creditworthiness and lender terms | May offer a higher limit, depending on available equity and lender requirements |
Interest rates | Generally higher because no collateral is provided | Generally lower because the loan is secured by your home |
Risk to your home | Your home is not directly pledged as security for the credit line | Failure to repay could put your home at risk |
Access to funds | Borrow, repay, and borrow again up to the approved limit | Borrow, repay, and borrow again up to the approved limit, subject to the agreement |
Best suited for | People who need flexible borrowing without using their home as collateral | Eligible homeowners who need access to credit and understand the risks of borrowing against home equity |
Why This Distinction Matters When Payments Become Difficult
Before choosing a debt-relief option, confirm whether your line of credit is unsecured or secured against your home. An unsecured line of credit can generally be included in a consumer proposal, while a HELOC requires separate consideration because your home is collateral. A Licensed Insolvency Trustee can explain how this affects your options.
How SCB Debt Solutions Can Help
If your line of credit payments are putting pressure on your household budget, speaking with a Licensed Insolvency Trustee can help you understand your options. SCB Debt Solutions can review your income, expenses, assets, and debts and explain which approaches may be suitable for you.
Book a free, confidential consultation with our Licensed Insolvency Trustee to discuss your line of credit or HELOC debt, ask questions, and understand the next steps.
Our Office Address: 617 11 Ave SW #210, Calgary, AB T2R 0E1
Consultation Options: Online and in-person consultations available.
Phone number: (403) 261-7779
Email: kmartinez@scbsolutions.ca
FAQs on Line of Credit Debt
Q1. What happens if I can't pay my line of credit?
If you cannot make your payments, interest may continue to accumulate, and your lender may contact you to collect the outstanding balance. Speak with your lender early to discuss possible arrangements and explore debt-relief options.
Q2. Can a line of credit be included in a consumer proposal?
Yes, an unsecured line of credit can generally be included in a consumer proposal. If your creditors accept the proposal, you repay an agreed amount under its terms. Secured lines of credit are treated differently.
Q3. What happens if you default on a HELOC in Alberta?
If you default on a HELOC, your lender may take legal steps to recover the debt, potentially including enforcing its security against your home. Contact your lender early and speak with a Licensed Insolvency Trustee about your options.
Q4. Can a bank freeze your line of credit?
Yes, a bank may freeze or suspend access to your line of credit depending on your agreement, payment history, or changes in lending conditions. Review your account terms and contact your lender to understand why access has been restricted and what steps you can take.
Senga Bailey, CIRP, LIT, is the President of SCB Debt Solutions (Smith Cageorge Bailey Inc.) and has been a Licensed Insolvency Trustee since 1997. A former senior manager with Arthur Andersen in Calgary, she founded the firm in 1998. For more than 25 years, Senga has helped Albertans work through debt with dignity, respect, and personal attention to each person’s unique situation.
