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As the deadline for RRSP contributions approaches, many people find themselves thinking the same thing: they want to contribute more, but cash flow can feel tight—especially this time of year.
Everyday expenses, rising costs, competing priorities, and the recent holiday season can make it difficult to come up with a lump sum for your RRSP. Even if you know contributing more can help lower your tax bill, that doesn’t necessarily make the decision any easier.
One useful tool to consider is an RRSP loan. This is a type of loan offered by many Canadian financial institutions that’s specifically designed to be used for your Registered Retirement Savings Plan. It allows you to maximize your RRSP contributions even if you don’t currently have the cash on hand.
Main Benefits
Maximize your contributions
One of the biggest advantages of an RRSP loan is the ability to use contribution room you might otherwise miss.
Missing a year could mean:
- No/less tax deduction
- Less money invested earlier
- Less time for compounding interest to work
An RRSP loan can help bridge that gap when cash might temporarily be tight.
Potentially get a bigger tax refund
RRSP contributions lower your taxable income.
More contributions = larger tax refund
Many Canadians then use that refund to:
- Pay down the RRSP loan immediately, or
- Make a large lump-sum payment, reducing interest costs
When used this way, the loan can largely be self-funding.
Start investing earlier
You’ve heard it a lot and it’s important to reiterate, time matters when it comes to investing.
Even a few extra months can make a difference over the long term, especially when returns are compounded over decades. By contributing now instead of waiting until you’ve saved enough, your money gets more time to grow.
This benefit is especially meaningful for younger investors, those early in their careers, and anyone with a long-term investment outlook.
RRSP Loan Example
Let’s have a look at a few scenarios:
Scenario A: No contribution
- RRSP contribution: $0
- Tax refund: $0
- Investment growth: $0
Result: No immediate tax benefit and no additional retirement savings this year.
Scenario B: RRSP Loan
- RRSP loan used as contribution: $10,000
- Tax refund received: ~$3,000 (varies by income)
- Refund applied to loan repayment
- Remaining balance paid off over time
Result:
- Immediate tax relief
- Money invested earlier
Over the long term, the early contribution may outweigh the short-term borrowing cost only if the loan is managed responsibly.
Apply for an RRSP Loan Today
Use an RRSP loan to contribute now and manage payments over time.
Risks and Downsides to Consider
Smooth out cash flow
RRSP loans can make sense for people who expect future income, like:
- Annual bonuses
- Commission payouts
- Tax refunds
- Irregular or seasonal income
Instead of waiting for that lump sum to arrive, a loan allows you to contribute now and repay it once the expected income comes in.
It’s still debt
At the end of the day, an RRSP loan is still a loan, hence a liability.
It adds another monthly obligation on top of your existing expenses. If you’re already juggling debt or struggling to keep up with bills, this could add unnecessary pressure.
Interest cost
RRSP loans usually come with relatively low interest rates, but low doesn’t mean zero. If the loan isn’t managed carefully, interest costs can eat into the tax benefits and reduce the overall value of the strategy.
Requires discipline
An RRSP loan works best if you can stick to a plan. You need to stick to repaying the loan and using your tax refund intentionally. You shouldn’t treat it as extra spending money.
If you struggle with budgeting, a loan might not be the right tool for you.
Tips for Borrowing Responsibly
If you’re considering an RRSP loan, keep these in mind:
- Borrow only what your cash flow can handle
- Automate payments to avoid missed installments
- Use your tax refund to pay down the loan
- Aim to repay the loan as soon as possible.
Repaying the loan as soon as possible helps to keep this strategy sustainable since you’re not carrying debt into another RRSP season.
Some lending platforms, including goPeer, allow loans to be repaid early at any time without penalties, offering you flexibility.
Final Thoughts
An RRSP loan isn’t a shortcut or magic solution, but it can be a useful tool in the right situation.
It may make sense if:
- You have a stable income
- You expect a tax return
- You have a clear repayment plan
- You want to maximize long-term growth
It might not be ideal if:
- You’re already carrying a lot of debt
- Cash flow is unpredictable
- Repayment would cause financial stress
As with most financial decisions, the key is discipline.
Make the most of RRSP season.
Contribute now and pay over time with a goPeer RRSP loan.
Disclaimer: goPeer offers unsecured personal amortizing loans throughout Canada in amounts from $1,000 to $35,000 with terms of 3 or 5 years and annual percentage rates (“APR”) between 8.99% and 34.99%, depending on an assessment of the borrower’s credit profile, financial position, and ability to service the loan. If a payment is unsuccessful, goPeer may charge an unsuccessful payment fee of $50. If a payment is late 30 or more days, goPeer may charge a late payment fee of $25 or 5% of the payment due, which ever is greater. goPeer charges an origination fee included in the advertised APR. There are no other fees on loans. Loans are subject to credit and underwriting approval and lending rules may vary by province. For example, the average borrowing cost paid on a $10,000 unsecured personal loan at an APR of 19.99%, with a 3-year term and weekly payments of $85.36 is $3,301.20.
