Feb 17, 2026
If you’re saving for retirement in Canada and you don’t have the cash to make the most of your Registered Retirement Savings Plan (RRSP) before the 2026 contribution deadline on March 2, you may consider an RRSP loan to max out your contribution.
An RRSP loan is exactly what it sounds like: you borrow money specifically to contribute to your RRSP. You then use that borrowed money to make your contribution before March 2 so the deduction can be claimed on your 2025 income tax return. People often look at this strategy in late February or early March when the deadline looms and they have some contribution left for the tax year.
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The key reason people consider this is tax related. RRSP contributions reduce your taxable income. For example, if you make $80,000 and contribute $10,000 to your RRSP, your taxable income effectively drops to $70,000. That can mean a lower tax bill and potentially a refund.
But just because you can borrow funds, it doesn't mean it's the right strategy for you.
Why you might consider an RRSP loan
You may be thinking: “I don’t have the cash today but I can afford to pay it back over time.” An RRSP loan lets you make your contribution now and bring forward your tax deduction rather than waiting until next year. In some cases banks will defer the first payment until after you receive your tax refund so you can use that refund to start paying down the loan.
This can also give your investments in the RRSP a bit more time to grow, since your contribution gets in earlier rather than later. The earlier your money is in the market, the more of a chance you have for compounding gains over the long haul. Taking out an RRSP loan enables you to take advantage of the opportunity to maximize your investment.
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The benefits in real numbers
Let’s make this concrete and look at some actual numbers.
Imagine you borrow $10,000 to contribute to your RRSP. Say your marginal tax rate is 30%. That means you can expect about $3,000 back at tax time from that contribution ($10,000 × 30%). That refund is immediate tax relief you wouldn’t otherwise see until later.
Now suppose you get a loan at 5% interest with a one‑year term. Simple interest on $10,000 at 5% is $500. Tax refund: $3,000; interest cost: $500; net advantage this year: $2,500
If you use the refund to pay down the loan quickly, your interest cost may be even less, depending on how soon you can apply the refund. That’s essentially turning some of your future tax savings into a more immediate cash benefit. That’s the math that makes it attractive for some people.
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Another real world example from one bank’s marketing materials shows a $5,000 loan at 5.2% with a 12‑month term. The total interest paid was about $88.55 while the tax refund was estimated at $2,000. That leaves a net benefit of about $1,911.45.
The downsides you should consider
Before you rush out and take one, let’s talk about the downsides.
Debt obligation
An RRSP loan is still a loan. You’ve just read how the tax refund can make the numbers look good, but you still have to repay what you borrowed. That monthly payment becomes a fixed part of your budget. If you’re already carrying other debt or your income isn’t stable, that added payment could squeeze your cash flow.
Multiple personal finance commentators point out that borrowing to contribute only makes sense if you can pay the loan off quickly and have a plan to do it. Otherwise you risk dragging debt over multiple years just to make one contribution.
Interest isn’t tax deductible
Even though your RRSP contribution garners a deduction, the interest you pay on the loan is not. That means that every dollar of interest is an expense you absorb without tax relief. This reduces the net benefit of the strategy compared with simply saving cash and contributing without borrowing.
Market risk
If your plan is to invest the borrowed funds right away, you’re also exposed to market risk. If the market tanks shortly after your contribution, the value of that investment could shrink while you still owe the full principal plus interest.
Read more: The ultra-rich are bailing on volatile stocks right now — these 4 shockproof assets are their new safe havens
Who should think twice
If discipline around saving is a challenge, taking an RRSP loan can sometimes just postpone the hard work of building good savings habits. Financial advisors caution that these loans add debt and may only make sense for people with strong cash flow and a clear savings plan. Otherwise, you risk carrying debt year after year instead of creating regular contributions on your own
Also, if your tax rate is relatively low, the immediate tax savings from an RRSP contribution are smaller, which makes the math less compelling. For lower income years, a Tax Free Savings Account (TFSA) contribution might be a better use of money than an RRSP loan.
Before you borrow, run the numbers with someone who can
This is where professional advice shines. A financial advisor or a tax professional can run more customized numbers including your exact tax bracket, your loan interest rates, any employer pension adjustments and your cash flow realities. They can use RRSP loan calculators offered by many banks or financial planning sites to model multiple scenarios for you.
If your firm or bank offers deferred payment options or preferential interest rates when the loan is used to fund that institution’s RRSP products, make sure you understand the fine print. Those details can have a bigger impact on your bottom line than you’d expect.
Final thought
An RRSP loan isn’t a clever cheat so much as it is a timing tool. For the right person with a solid repayment plan and a decent marginal tax rate, it can unlock extra upfront benefits and bigger refunds this tax season. For others it can create needless debt and financial stress.
If you’re on the fence ask yourself this: can I pay off the loan quickly using my refund? If yes, the strategy might make sense. If not, consider saving throughout the year and making regular RRSP contributions instead.
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Leslie Kennedy served as an editor at Thomson Reuters and for Star Media Group, followed by a number of years as a writer and editor and content manager in marketing communications, before returning to her editorial roots. She is a graduate of Humber College’s post-graduate journalism program and has been a professional writer and editor ever since.
