If you’re looking to apply for a Tangerine line of credit but don’t know how to get started, this review will guide you through everything you need to know.
According to recent data released by Statistics Canada, Canadian households had a total of 230 billion owing as line of credit at the end of July 2022.
That’s more than the combined total household personal loan and credit card debt in the same period. This shouldn’t be surprising because lines of credit (LOC) combine low-interest rate and high credit limit.
Whether you’re looking to renovate your home, fund an emergency, or consolidate high-interest debt, a line of credit is worth considering.
While the Tangerine line of credit competes significantly with other lines of credit in Canada, you need to know all that it entails before applying.
In this review, I cover everything you need to know about Tangerine LOC including the pros and cons, application process and alternatives.
Let’s get started!
What is a Tangerine Line of Credit?
A Tangerine line of credit (LOC) refers to a revolving line of credit facility with variable limits just like a credit card, but with lower rates.
Tangerine offers 2 types of LOCs – secured and unsecured lines of credit. The interest rates are determined using the Tangerine Prime Rate and an Adjustment Factor.
At the time of writing, the Tangerine Prime Rate is currently 5.45% which is the same as the prime rates of most big banks in Canada.
The Adjustment Factor used to calculate the LOC’s interest rate will vary from one customer to another based on their credit worthiness. This factor will be communicated to you when you’re approved for the credit and also disclosed on the Monthly Statement.
Tangerine determines the line of credit limit you can access and can decrease your limit without giving you prior notice. But you can also request for an increase or decrease of your limit at any time.
The Tangerine Line of Credit offers flexible payment options, access to joint LOC and like the other bank’s LOCs, there are no annual fees.
How Does the Tangerine Line of Credit Work?
The Tangerine LOC works like many of the other line of credit products in Canada.
Once you apply for the Tangerine LOC and are approved, you will be provided with a certain credit limit which you can use periodically up to the maximum limit.
For example, if you’re approved for a $20,000 line of credit by Tangerine, it means you can borrow up to $20,000 at any point.
Once you start borrowing from your approved credit limit, you will start incurring interest immediately. Tangerine requires you to make a minimum payment of interest-only or 2% of the current balance plus interest.
It’s worth noting that Tangerine’s unsecured lines of credit charge higher interest than the secured lines of credit. This is expected since unsecured LOCs pose more risk than secured LOCs to the bank.
In the following sections, I discuss Tangerine’s secured line of credit in detail to help you make an informed decision.
Tangerine Line of Credit Rate
The Tangerine line of credit rate varies depending on the type of LOC you’re applying for and your credit profile. As expected, the credit rate for secured credit are lower than the rate of unsecured credit.
For example, the current Tangerine line of credit rate for secured credit (HELOC) is 5.35%, which is 10 basis points lower than the Tangerine prime rate (5.45%).
Based on the Tangerine Adjustment Factor, your unsecured line of credit rate could be lower or higher.
Learn more: Tangerine Mortgage Rates
Tangerine Home Equity Line of Credit
The Tangerine Home Equity Line of Credit (HELOC) is a secured line of credit whose interest rate and limit are determined by your current home equity or market value.
Because you pledged your home equity to obtain this revolving line of credit, your interest will be relatively lower compared to unsecured LOCs.
The current HELOC rate of Tangerine is 5.35%.
Even though HELOCs are more attractive than unsecured lines of credit, you need to treat them with caution.
Taking a Tangerine HELOC while paying your mortgage could easily increase your monthly obligations. If you’re unable to meet the HELOC payment, you risk losing your home.
Therefore, be sure you’ll be able to meet your monthly obligations before applying for and using an HELOC.
Pros and Cons of Tangerine Line of Credit
To make an informed decision before applying for a Tangerine secured or unsecured line of credit, here are some pros and cons to keep in mind:
- Competitive interest rates: Both Tangerine secured and unsecured lines of credit have competitive interest rates that compares favourably to many other financial institutions
- No annual fee: There is no annual fee involved on Tangerine LOC or HELOC. This helps you focus on meeting your monthly minimum payment.
- Flexible repayment: You can pay off your LOC balance without any pressure. You can make an interest-only minimum payment or 2% plus interest minimum payment. In addition, you can pay off your balance in full without any penalty.
- Easy access: You can access your Tangerine LOC at any time from the date it was approved. You can access the credit online, by telephone, via Tangerine ABM, via automatic transfers or by pre-authorized debit.
- Credit increase: Tangerine allows you to request a credit increase which is dependent on your credit history and financial situation.
- Over-limit: Unlike other financial institutions, Tangerine may allow you to borrow beyond your entitled credit limit which will be included in your minimum payment.
- Joint holders: Tangerine allows two individuals to apply for a single LOC. The two individuals are equally responsible for the credit obligations and are liable for the entire debt.
- No insurance coverage: Tangerine doesn’t have coverage on a line of credit. This means that you must pay off your credit interest and balance even if you’re incapacitated or hit by an emergency that affects your ability to earn income.
Is the Tangerine Line of Credit Worth It?
The answer depends on your evaluation of the pros and cons of Tangerine LOC. But if you want to make an informed decision, it’s essential you start by evaluating your situation.
The truth is, a line of credit is not suitable for everyone. But because lines of credit have relatively lower interest rates and low minimum payments than credit cards and personal loans, they are usually very attractive.
So how do you determine if a Tangerine LOC is worth it? Start by examining your situation and determine if you truly need a LOC.
Some of the situations that make LOC worthwhile include when:
- Funding a significant home renovation
- Funding emergencies
- Consolidating high-interest debt
- Funding a business initiative
If you’re under any of the above situations, then Tangerine LOC may be worthwhile. The final decision will depend on your cash flow, financial discipline and debt payment.
Because Tangerine LOC is easily accessible and you can increase the limit at any time, you need to be careful how you access it to avoid incurring debt.
If possible, ask Tangerine to lower your credit limit to reduce the temptation to overspend.
How to Apply for a Tangerine Line of Credit
You can apply for a Tangerine LOC within a few minutes as everything is done online. However, you must meet the following requirements to initiate the application process:
- Reach the age of majority in your province or territory of residence
- Consent to a credit bureau check
- Be willing to provide proof of income
Once you meet the above eligibility, you can follow the steps below to apply for a Tangerine LOC online:
- Visit the application page here
- Click on the “Apply Now” button
- Sign-up/login to your Tangerine account
After you’re approved by the LOC, you will be required to set up a Payment Account using your savings or chequing account with Tangerine or another financial institution in Canada.
Tangerine will automatically withdraw your minimum payment from the Payment Account once you have sufficient funds.
Tangerine Line of Credit Alternatives
If you’re not okay with Tangerine LOC or are looking to compare different options before deciding, the following are some of the best alternatives to consider.
1. Simplii Line of Credit
The Simplii Financial line of credit has competitive interest rates that are determined by CIBC prime rate and individual credit records.
Currently, the CIBC’s current prime rate is 5.45%, which is the same as the Tangerine prime rate. The Simplii line of credit interest rate is also subject to change at any time.
Like Tangerine, Simplii Financial also allows you to make low and flexible monthly payments on your outstanding line of credit.
What I also like about the Simplii line of credit is that it comes with optional creditor insurance. This means that you’ll be covered in case you are unable to meet your LOC payment due to disability, job loss or death.
As noted above, Tangerine doesn’t have this type of coverage.
Learn more: Simplii Financial Review
2. BMO Line of Credit
The BMO line of credit offers up to $25,000 in unsecured credit with a variable interest rate determined by the BMO prime rate.
Like Tangerine and Simplii, BMO has a current prime rate of 5.45%. Besides the prime rate, BMO also determines your LOC interest rate based on your credit history and credit limit. BMO also offers a secured line of credit which comes with a lower interest rate.
That said, you can access the BMO line of credit at any time and repay at your own pace without any penalty. You can make an interest-only payment or pay $50/2% of your outstanding balance as a minimum monthly payment.
Unlike Tangerine, the BMO line of credit comes with Balance Protection and Payment Protection. The Balance Protection covers Critical Illness and Life Insurance which may pay off or reduce your outstanding LOC balance if you’re ill or dead.
With Payment Protection, you will enjoy Job Loss and Disability Insurance benefits. These may provide partial or full payment of your LOC if you lose your job or are unable to work due to disability.
3. RBC Line of Credit
Like Tangerine, RBC also offers a secured and unsecured line of credit. Both credits have variable interest rates that are determined by the RBC prime rate, which is 5.45% at the moment.
You can access the RBC secured line of credit using your investment portfolio or home equity. This will provide you with a lower interest rate and higher credit limit.
As of the time of writing, RBC offers $5,000 to 65% of home equity secured line of credit. This is way higher compared to the $5,000 maximum limit of the RBC unsecured credit line.
RBC lines of credit accounts also do not have annual fees. In addition, they don’t have withdrawal and over-limit fees.
Besides allowing you to reduce your credit limit online, RBC also allows you to access your line of credit at any time through ATM, cheque or online bank transfer.
Verdict on Tangerine Line of Credit
Lines of credit offer convenience and are a smart way to borrow with their lower interest rates and lower monthly payments.
While this presents numerous advantages, it can work to your disadvantage if you’re not well informed.
The Tangerine LOC shares so many characteristics with other LOC in Canada and you can’t go wrong with it.
But before you do so, ensure you’re comfortable with the interest rate and are able to meet the minimum payment to avoid incurring more financial burdens.
Ultimately, opening a high-interest savings account and building an emergency fund will gradually reduce your reliance on credit products. But before you become financially independent, you should always weigh the pros and cons of any credit before applying.
If you’re still not sure whether Tangerine LOC is for you, please contact your financial advisor before making a final decision. But if you’re able to decide after reading this review, kindly share your thoughts with me in the comment section.
Finally, I invite you to check out our other relevant blog posts before leaving. This includes:
- 21 Best Low-Interest Credit Cards in Canada
- 11 Smart Ways To Get Out Of Debt Fast (Plus The Benefits)
- How to Get Your Debt Under Control and Live a Better Life
A Tangerine line of credit (LOC) refers to a revolving line of credit with variable limits and rates like a credit card. It has no annual fee and offers flexible payment options and access to joint LOC among others