In the evolving world of personal finance, understanding your options is more critical than ever. For homeowners in Quebec grappling with debt or foreseeing significant upcoming expenses, two common solutions arise: credit card borrowing and home equity loans. Both methods offer immediate financial relief, but they differ vastly in their costs, terms, and long-term effects.  

This article aims to shed light on these options, equipping you with the knowledge to make informed financial decisions.

The ubiquitousness of credit cards

Using a credit card has become second nature in our society. They are in our wallet or on our phones, they are universally accepted, and their automatic payments and direct debits are convenient. Unless one has accumulated cash, most large expenses are done by credit cards. Points and loyalty programs encourage this form of payment offering rewards to users.  

If one is able to pay back their credit card in full every month then there are advantages in using them. However, the simplicity and immediacy of using a credit card can sometimes mask the realities of what we're signing up for. The ease of tapping or inserting a card for a purchase can inadvertently lead us down the path of high-interest debt, often without our full realization. 

Understanding credit card debt

Credit card debt is a form of unsecured debt, meaning there's no collateral backing it up. Because of the higher risk this poses to lenders, credit cards typically come with higher interest rates than other forms of debt. In Quebec, the average credit card interest rate is around 21.99%. This interest is not a one-time fee; it compounds, which means that you pay interest on your interest.

To illustrate this, let’s say someone’s credit card balance is $20,000, with an interest rate of 21.99% (Canadian cards typically run between 19.99% and 25.99%). If they only make the minimum monthly payment of 3% ($600), they will end up paying $11,182.75 in interest only and pay off the total amount in 4 years and 4 months.  

"While credit cards offer convenience and immediate access to funds, their high-interest rates can lead to a significant financial burden. This is especially true if you're only making minimum payments, as interest charges can quickly outstrip the original amount borrowed."

Carrying a balance on your credit card can rapidly lead to mounting debt. As illustrated above, if you're only able to make the minimum payment, you could find yourself trapped in a cycle of debt that can be difficult to break free from. This can lead to stress and financial instability, affecting your quality of life and future financial plans.

For homeowners, it's crucial to remember that there might be other options for borrowing. Solutions like home equity loans can provide a lower-interest alternative, making financial management more affordable and accessible in the long term. Being aware of these alternatives and considering them when faced with significant expenses can lead to better financial health.

Understanding home equity loans

Home equity loans offer a different financial pathway for homeowners. A home equity loan allows you to borrow against the equity you've built up in your home. Equity is the difference between what your home is worth and what you owe on your mortgage. These loans are secured, meaning your home acts as collateral. This security can result in lower interest rates compared to unsecured debt like credit cards.

At PADS, we offer home equity loans starting at an interest rate of 9.99% with additional sign up and notary fees. These loans can provide a more affordable way to access funds for homeowners, with more flexible terms than those offered by credit card companies.

Home equity loans: A closer look

Home equity loans are ideal for financing large expenses or consolidating higher-interest debts, such as credit card debts. Typically, these loans come with a fixed interest rate and a set repayment period. This means your monthly payments stay consistent throughout the term of the loan, which could be anywhere from 6 months to a few years. These predictable payments make budgeting much easier and less stressful.

One major advantage of home equity loans is their potential for debt consolidation. By using a home equity loan, you can combine multiple high-interest debts into a single payment with a lower interest rate. This not only simplifies your finances but also allows for more manageable monthly payments and a faster path to becoming debt-free and improving your credit score.

Remember, while this strategy simplifies your financial management, it's also crucial to address any underlying issues of overspending for sustainable financial health.

The cost of a home equity loan

The cost of a home equity loan is determined by various factors, including the amount borrowed, the loan term, and the interest rate. The significant advantage here is the lower interest rate compared to credit cards.

Let's consider the same debt amount of $20,000, but this time as a home equity loan at a 12% interest rate, which is a reasonable rate at PADS for the average borrower. At the same monthly payment of $600 ($603 in this case), the total interest paid would be $4,128.66 - that’s almost a third of the interest charges from the credit card debt – and the loan would be paid off in 3 years and 4 months , a full year before the credit card scenario. If you include application and notary fees, there would still be a significant savings vs credit card debt.

Why choose a home equity loan?

Choosing a home equity loan over credit card debt can provide numerous benefits. With lower interest rates, you can save thousands of dollars over the life of the loan. The cost predictability through fixed monthly payments simplifies budgeting and financial planning.


While credit cards provide immediate access to funds, their high interest rates can make long-term borrowing expensive. On the other hand, a home equity loan, while requiring collateral, offers lower interest rates and can be a beneficial tool in managing and eliminating debt.

Choosing between a credit card and a home equity loan depends heavily on your personal financial situation, the amount you need to borrow, and how quickly you can pay it back. For homeowners dealing with large debts or major expenses, home equity loans often provide a cheaper and more structured debt repayment plan.

At PADS, we're committed to guiding Quebec homeowners on their financial journey. We believe in transparency, simplicity, and accessibility. If you're ready to explore the possibilities a home equity loan can bring, reach out to us today. You'll discover a lending experience that's clear, efficient, and most importantly, tailored to you.

Curious to find out how much you could borrow with a PADS home loan? Apply online now to find out in minutes!

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