Let’s say you’ve got a major purchase coming up: you’re about to renovate your home, or are months away from your wedding. To cover the costs, a common approach is to liquidate a part of your portfolio. But one option that’s not as well known is accessing a portfolio line of credit, which allows you to borrow money against the value of your investments.
It’s a flexible way to access liquidity when you need it, without sacrificing long-term investment growth. Wealthy Canadians have done this for a long time — it’s just now becoming more broadly available. But portfolio lines of credit do come with a few risks that you should understand before you borrow.
The cost of selling your investments
When you sell part of your portfolio, you aren’t just bearing the cost of whatever the investment proceeds are paying for. You may also face a tax bill and intangible costs associated with losing the potential for future gains.
Capital gains tax
If you’ve been investing through a non-registered account, you’ll face a capital gains tax on any investment growth you experienced while holding the securities. If you take money out of a registered account like an RRSP, you’ll also be taxed at your current tax rate. The federal government taxes 50 per cent of capital gains, so if you purchased a stock five years ago and sold it for a profit of $200, you’ll be taxed on $100 of it. You pay additional income tax at your marginal rate for the taxable portion of your capital gains.
In contrast, if you borrowed money through a portfolio line of credit, your investment gains remain unrealized — so you get to keep 100 per cent of your capital working for you in the market while you use the value of your investments.
Opportunity cost and compounding
Time in the market has been proven to be an asset in its own right. The longer your money is in the market, the more it benefits from the magic of compounding — where any investment gains, dividends and interest you earn are reinvested right back into the market, growing your portfolio without any effort on your part.
Quick access to funds
It’s not a cost in the traditional sense, but when you liquidate assets, it can take days to settle the transaction and move the money into your account — something that could slow you down if your transaction is time-sensitive, such as making a down payment deposit to secure a home purchase. When you borrow from a portfolio line of credit, the money is transferred into your account much more quickly.
See your portfolio as a cash source
Most of us are used to thinking of our portfolio as purely a savings or retirement fund. But it can also be leveraged to support your shorter-term goals. When borrowing through a portfolio line of credit, your investments become the collateral securing a loan — meaning you can access cash when you need it while continuing to hold onto the underlying securities.
How borrowing against your portfolio works
A portfolio line of credit is essentially a loan from your financial institution with your investments serving as the guarantee that you’re able to pay it back. That makes it a secured line of credit, and it functions similarly to a home equity line of credit.
You’ll be able to borrow up to a certain percentage of the value of your portfolio. Because your investments are the collateral, you’ll typically be pre-approved for a portfolio line of credit. They also tend to have lower interest rates than an unsecured personal line of credit, and can sometimes be cheaper than a home equity line of credit (HELOC). However, the interest rate is variable, not fixed.
Like a HELOC, a portfolio line of credit is a revolving loan, meaning you can borrow, pay off the loan, and borrow again without the need to re-apply for credit. You’ll only pay interest on the portion of the portfolio line of credit that you use: if you have no balance, there’s no interest to pay.
It’s important to keep in mind that your borrowing limit on a portfolio line of credit is set based on your portfolio’s total value. If your investments drop in value, any outstanding loan balance will represent a larger share of the total than it did before, bringing you closer to your credit limit. In extreme scenarios, if you’re borrowing close to your maximum, market turbulence could push you over your credit limit. That would force your financial institution to demand for you to quickly add funds to your account and get back under your credit limit or they may liquidate your securities.
When interest is cheaper than selling
Let’s say you need $10,000 to fund a home renovation. Here’s an example of what that could cost if you were to borrow through a portfolio line of credit, versus the costs you’d experience if you cashed out securities in a non-registered account.
Borrow through a portfolio line of credit
In this example, you borrow $10,000 through your portfolio line of credit at the interest rate of 4.95% (the Bank of Canada’s current prime rate as of March 17, 2026 — 4.45% — plus 0.5%), and are able to make monthly payments of $250, or $3,000 per year, toward paying it off.
Portfolio line of credit balance | Interest accrued (Prime + 0.5%, or 4.95%) | Monthly payments paid each year | |
|---|---|---|---|
| Year one | $10,000 | $495 | $250 |
| Year two | $7,495 | $371 | $250 |
| Year three | $4,866 | $240.86 | $250 |
| Year four | $2,106.86 | $104.28 | $185 |
You would have spent an additional $1,211.14 in interest, in addition to $10,000 to repay the principle, over four years (assuming the interest rate never changed).
Sell your stocks
Now let’s say you sell $10,000 in stocks that you’d held in a non-registered account to fund the renovation. You’d face capital gains tax on half of that amount, or $5,000. Here is what the capital gains tax would look like for every federal income tax bracket (note that this is in addition to your provincial tax rate, so the total you need to pay will be higher):
Tax bracket | Tax rate | Capital gains tax paid on $5,000 |
|---|---|---|
| Taxable income that is $58,523 or less | 14% | $725 |
| Taxable income over $58,523 up to $117,045 | 20.5% | $1,025 |
| Taxable income over $117,045 up to $181,440 | 26% | $1,300 |
| Taxable income over $181,440 up to $258,482 | 29% | $1,450 |
| Taxable income over $258,482 | 33% | $1,650 |
Selling would also forfeit any future investment growth. Using the S&P 500 index’s average annualized return from 1928 to the third quarter of 2025, of 10.12%, here’s what that might look like over a four-year period:
Year one: $10,000 x 10.12% = $11,012
Year two: $11,012 x 10.12% = $12,126.41
Year three: $12,126.41 x 10.12% = $13,353.60
Year four: $13,353.60 x 10.12% = $14,704.98
So depending on your tax bracket, the cost of selling stocks could range from about $5,430 to $6,350 over the same four-year period.
Risks and considerations
Interest rates
The interest rate on a portfolio line of credit is variable, meaning it can go up if the Bank of Canada (BOC) hikes its overnight rate. That can make it much pricier to pay down the loan. As an example, at the height of the BOC’s rate hikes, when the overnight rate was 5% in mid-2023, and most lenders’ prime rates were 7.2%, a portfolio line of credit with a prime + 0.5% interest rate would have sat at 7.7% interest.
Market volatility
The credit limit on a portfolio line of credit is set based on the total value of your portfolio. If the market value of your assets drops, any outstanding loan balance you have will automatically creep closer to your credit limit, because the loan now makes up a larger share of the total.
It’s why a portfolio line of credit has a credit limit that tends to be more conservative: it’s meant to protect against big market swings compromising your loan. But if you’re borrowing at or close to your limit, a major market drop could drive your loan above it, triggering the need to add funds or risk having your securities liquidated.
Sticking to a responsible borrowing ratio rather than borrowing the maximum allowable amount can protect you from the possibility of a margin call during market turbulence.
Common questions about portfolio liquidity
Will borrowing against my portfolio affect my credit score?
No, using a portfolio line of credit doesn’t impact your credit score; since your portfolio is securing the loan, your brokerage isn’t taking a risk on you the way a lender typically is. However, defaulting on a portfolio loan would show up in your credit score.
Is the interest on a portfolio loan tax-deductible?
Maybe. If you borrow money to invest, the interest is generally tax-deductible. But when you’re borrowing for personal use, you generally aren’t able to claim that interest as a tax deduction.
How is this different from a traditional bank loan?
Portfolio lines of credit are different from bank loans in a few ways. They:
are secured lines of credit, while bank loans are generally unsecured. That means bank loans may require a credit check and approval process, and tend to have higher interest rates to reflect the risk the lender is taking on the borrower.
are revolving loans: you can borrow, pay it off and borrow again without re-applying. You can also pay it off on a more flexible timeline, as long as you make monthly interest payments. Traditional loans typically have a fixed term and repayment schedule.
only have variable rates, whereas if you take out a traditional loan you’re able to choose between a fixed or variable interest rate.
require you to keep a certain amount of collateral in your account.
can vary in how much your credit limit is based on the holdings in your account.
may require you to add more funds if your account balance falls below the requirement, otherwise your securities may be liquidated.