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What about RRSP Loans?
The
pros and cons of borrowing for an RRSP
contribution:
Because the money is being used for
investments within a tax-sheltered plan,
interest on money borrowed to make your
RRSP contribution is not deductible for
tax purposes. Whenever possible, you
should use cash to make an RRSP
contribution. In some cases, however, it
can make sense to borrow to contribute
to your RRSP. If you can pay off your
loan quickly, particularly if you are
getting a tax refund, the interest
expense can be minimized.
Here’s an example:
Let's assume you want to maximize your
current year RRSP contribution room of
$10,000 by the deadline of 60 days
after the end of the year. This
generates a tax refund of
approximately $4,300 (assuming a
marginal tax rate of 43%). If you
borrow the $10,000 to make the
contribution, you will be able to pay
back nearly half of the loan when you
receive your refund. Many financial
institutions will even delay your
first repayment for about four months
until you receive your tax return.
You will still incur interest charges,
but the lump-sum re-payment will cut
your borrowing costs substantially.
If borrowing makes sense for your
situation, we have access to RRSP loans
for our clients through several
different financial institutions. The
rates are very competitive and
approval
of your loan is usually given within 24
- 72 hours. If you are wanting to
purchase GICs through one of our banks,
credit unions, insurance companies or
trust companies, we can arrange a loan
through that institution. If your RRSP
money is being invested in mutual funds,
we can offer loans through MRS Trust. Please call us for more details.
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