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Pay loan with RRSP's or consolodate?

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    Pay loan with RRSP's or consolodate?

    Would it be better to consolodate debt into a $50000 loan and pay $1000/mth for 5 years or collapse my rrsp's and pay $18000 loan at tax time? Please advise

    Your RRSP is a long term retirement fund, it isn't an ordinary saving account to use for other expenses. The penalties and tax hit you'll take hopefully will make you re-consider. The true value of a retirement fund is that continuing contributions and long term compounding will add up over many years to pay basic expenses after 65 y/o, no longer working but still needing a roof overhead and food daily.

    Before you take such damaging action, will you allow us to look at some other options? What is the household income? What expenses? Are you willing to list what you owe, the monthly payments and interest rates for each?

    Would you be willing to make some short term changes and temporarily reduce your standard of living to fix financial woes? Do you having items you no longer use or need that could be sold?

    Sorry for so many questions but we truly try to help and you can count on us to cheer your every step forward.


      With the loan terms that you had mentioned, you are effectively paying an interest rate of about 4% per year.

      Withdrawn money from your RRSP will be subject to ordinary income taxes. I am not very familiar with RRSPs, so I am not sure if there is a penalty that would be levied. Even so, I would not withdraw money at an income tax rate in order to pay off a debt at 4%.

      I would leave the RRSP alone and focus on paying off the loan with my income, if I were you. How quickly could you pay off the loan? Do you have extra income that could be used to pay off the loan sooner? Are there any penalties to paying off the loan early?
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