Why taking out a loan for your
RSP contribution may make sense

Strategic use of credit can help you get ahead, by getting money into your RSP sooner.

Over the long term, the benefits of deferring taxes and earning compound interest can far outweigh the interest cost of using a loan or line of credit to contribute to your RSP.

Consider what happens if you reduce your RSP contribution by just $1,000 when you are 29 and don’t make it up in a future year. By the time you’re 69, your RSP will be worth $5,743 less, assuming an average annual rate of return of 6%.

If you apply your tax refund against the loan or line of credit, you’ll substantially reduce your interest costs and payments.

As long as you know that you have enough income to repay the loan, an RSP loan can make sense. Remember, too, that your contribution may trigger a tax refund, which you can use to pay down your loan or line of credit and reduce your cost of borrowing.