Thread: RRSP Loan?
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Old 02-11-2016, 01:54 PM   #2
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Join Date: Dec 2006
Location: Calgary, Alberta

Well I can't give you exact advice, being that this is an internet forum and I don't know you. So generally speaking it doesn't sound like it makes sense at this point. You don't have a huge income, and probably have a lot of things (tuition, books, school in general) that you can't write off as non-refundable credits? That along with the basic personal exemption and you're probably not looking at a tax bill, or so I would assume.

An RRSP loan can be a good strategy for people to make a lump sum contribution though, and then pay it off using the tax return and then monthly payments until next February (occasionally people pay longer for larger amounts and for longer than a one year contribution in general). The benefit is that you invest the full amount today, and make that contribution to go against last years income, so you can save money on taxes. A lot of places defer the first payment for 90 days, so you can file and get back some money on your taxes, which you then apply to the loan. The lump sum gets invested now and you gain on it (theoretically!) all year while you make those monthly payments. So that is one way to use them, and it can be a good idea for the right person in the right situation.

Another way is a scenario where you were going to pay say $10k into your RRSP this month. You would borrow say $5000 and now invest $15,000 instead. You file your taxes and at 39% (highest bracket in Alberta) get back a tax return now of $5850, and pay off the loan. There are a number of strategies you can use, but as with anything involving borrowing in particular you should seek out individual advice.
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