Borrowing for Your RRSP
Starting, growing and maximizing your retirement savings is an important part of every financial plan. It’s not always easy to make the most of your RRSP contributions if you don’t have the extra money to spare. Borrowing for your RRSP contribution might be an option to consider. Libro offers re-advanceable RRSP loans which can be used year after year to make a contribution without having to re-apply each time, as well as RRSP catch-up loans to make the most of the total RRSP contribution room available to you.
Key Benefits of RRSP Loans
- Reduce taxable income, potentially putting you in a lower tax bracket
- Take advantage of unused RRSP contribution room from previous years
- Benefit from more potential earnings from your RRSP
- Interest rates as low as Libro Prime+ 3%*
- No early loan prepayment charges – pay the loan off at any time without penalty, you can use your tax refund to repay the loan
RRSP Loan Examples
Whether or not an RRSP loan makes sense for you will depend on your financial situation including factors like your taxable income (and current tax bracket), your current cash flow and ability to pay down debt. Check out the examples below.
RRSP Loan Type |
Re-advanceable |
Catch Up |
|---|---|---|
RRSP loan amount |
$3,000 |
$20,000 |
Your marginal tax rate |
40% |
40% |
Loan interest rate |
7.20%* |
9.45%* |
Loan term |
12 months |
24 months |
Monthly loan payment |
$260 |
$916 |
Tax rebate |
$1,200 |
$8,000 |
Less loan interest paid |
$118 |
$2,028 |
Savings |
$1,082 |
$5,972 |
All information displayed is for illustrative purposes only. *Rates used are examples only; borrower rates are subject to credit approval. Contact Libro for additional details on rates and terms for your situation.
Helpful Tools and Resources
Responsible Investing: Fact versus Fiction
Learn about responsible investing from Paul McQueen, Libro’s Vice President, Wealth.
Retirement Planning Calculator
See if you will have enough money to last through retirement
Frequently Asked Questions about RRSP Loans
Do I need a good credit score to get an RRSP loan?
Yes. Standard lending criteria applies for RRSP loans, i.e. credit score, income and ability to repay. Talk to a Libro Coach for about whether or not you qualify for an RRSP loan.
How much can I borrow?
The maximum for an RRSP loan at Libro is $25,000.
How long can I take to repay an RRSP loan?
RRSP loans must be repaid within 15 months for a re-advanceable loan. An RRSP catch-up loan can be repaid over a longer period as determined with you and a Libro Coach. Keep in mind the longer you take to repay the loan the more interest you pay.
Where should I invest my RRSP funds?
Where you should invest depends on multiple factors, including things like your age, current investment portfolio mix, risk tolerance and years until retirement. Libro offers all the investment options you need, talk to a Coach about your plan today.
What about interest rates?
Borrowing for your RRSP when loan interest rates are high costs you more in the long run. Be sure to look at the rate you’re earning on your RRSP investments compared to the interest you’re paying on the RRSP loan to decide if it’s a good idea. A Libro Coach can help you figure it out.
Manage your money with Libro
Book an appointment with a Libro Coach today to apply for an RRSP loan or discuss your retirement savings options.
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