What Is An RSP Loan?

What is an RSP loan
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Saving for the future is an important financial goal for many individuals. One effective strategy to boost your retirement savings is by utilizing an RSP loan. Whether you are just starting your retirement planning journey or looking to maximize your contributions, an RSP loan can provide you with a valuable opportunity. In this article, we will explore what an RSP loan is, how it works, and the potential benefits it offers. So, let’s delve into the world of RSP loans and discover how they can empower your financial future!

What is an RSP loan?

An RSP loan, also known as a Registered Retirement Savings Plan loan, is a financial tool designed to help individuals contribute to their retirement savings. It enables you to borrow money to make a lump sum contribution to your RSP, which allows you to take advantage of tax benefits and increase your overall retirement savings.

How does an RSP loan work?

When you opt for an RSP loan, you are essentially borrowing money to make a contribution to your RSP. This contribution helps reduce your taxable income for the year, potentially resulting in a larger tax refund. The loan must be repaid over a specified period, usually ranging from one to five years, depending on the terms of the loan.

The loan repayment period typically starts after the contribution has been made, and regular payments are made to the lender, including both principal and interest. By the end of the repayment period, the loan is fully paid off, and your retirement savings have increased. It’s essential to note that interest rates on RSP loans are typically lower compared to other types of loans, making them an attractive option for individuals looking to save for retirement.

Benefits of RSP loans

1. Tax advantages

One of the significant advantages of an RSP loan is the potential tax benefits it offers. By contributing to your RSP, you can lower your taxable income for the year. This reduction in taxable income may lead to a tax refund, which can help you repay the loan, depending on your specific financial circumstances. It’s essential to consult with a tax professional to determine how an RSP loan can benefit your unique situation.

2. Maximizing contribution room

RSP loans can be especially beneficial if you haven’t maximized your annual RSP contribution room. By taking an RSP loan, you can make a lump sum contribution and catch up on unused contribution room from previous years. This allows you to maximize your tax-advantaged savings potential and make significant strides towards securing your retirement.

3. Long-term growth potential

By contributing a larger amount to your RSP through an RSP loan, you potentially increase the growth potential of your retirement savings. The earlier you start saving and the more you contribute, the longer your investments have to grow, compounding over time. This can have a substantial impact on the size of your retirement nest egg.

4. Flexible repayment options

RSP loans offer flexibility when it comes to repayment. You can choose a repayment term that suits your financial situation, ensuring that you can comfortably meet your obligations. Additionally, some lenders may offer flexible payment options, such as the ability to make additional lump sum payments or adjust payment amounts over time.


Yes, you can borrow from your Registered Retirement Savings Plan (RSP) under the Home Buyers’ Plan (HBP) or the Lifelong Learning Plan (LLP) if you meet the eligibility criteria. However, it’s important to consider the long-term impact on your retirement savings before deciding to withdraw.

There is no difference between RSP and RRSP. They both refer to the same thing: Registered Retirement Savings Plan. RSP is simply the abbreviated form of RRSP.

The interest rate on an RSP loan can vary depending on the financial institution and other factors. It’s best to check with your bank or financial institution to get the most accurate and up-to-date information on interest rates for RSP loans.

An RSP line of credit is a type of loan or credit facility that allows you to borrow funds to contribute to your Registered Retirement Savings Plan (RRSP). It provides a convenient way to maximize your RRSP contributions, especially if you don’t have the funds readily available. The interest rates and terms of an RSP line of credit may vary, so it’s advisable to consult with your financial institution for specific details.

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Written by:

Jim Pan, CFP, MFA-P

Jim is a dedicated, fee and advice only independent Certified Financial Planner with a focus on supporting healthcare business owners during their crucial growth phase. His expertise lies in offering comprehensive solutions to minimize taxes while embracing a holistic approach. With a career spanning back to 2010, Jim has established a strong presence in the financial industry. He proudly holds a range of designations, including Certified Financial Planner (CFP), and Master Financial Advisor - Philanthropy (MFA-P). He is currently pursuing additional designations and qualifications to better serve his clients and community. Beyond his qualifications, Jim is a member and an esteemed participant in the Million Dollar Round Table (MDRT), an exclusive global association comprising the top 1% of financial advisors. Jim's commitment extends to the community, where he spearheads numerous charitable fundraising events and plays an active role in enhancing the well-being of others. Additionally, he has contributed significantly by serving on the board of the Canadian Mental Health Association in Vancouver. Currently, he volunteers with Junior Achievement of British Columbia (JABC) to present personal finance topics to youths.

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