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Student Credit Loan

 

You are not eligible for government loans and bursaries or they are not enough to meet your needs?

Financial institutions offer credit to students. Interest rates on these loans are higher than student financial assistance and interest will have to be paid during the study period. With a student budget that is often small, interest can be very heavy if you use these types of credit right from the start of your studies. After a while, part of the loan will be used to pay interest!

However, this type of credit can be useful if a student who is not entitled to loans and bursaries uses it to complete his last year of studies.

Student credit lines of credit

Student credit lines of credit

Some financial institutions offer student lines of credit. A line of credit allows you to withdraw money directly from your personal account up to a limit established with the financial institution. Interest must be paid from the moment the money is used until the full repayment of the loan. The amount becomes available when the account balance is zero. When margin money is used, the account balance becomes negative.

  • As a minimum, interest must be paid monthly, including during studies.
  • Interest is between 4 and 6%.
  • Loan repayment begins approximately 6 to 12 months after graduation.

After 6 to 12 months, the interest rate rises. The increase varies from one institution to another, but averages between 5% and 8%. Why? Because the line of credit is turned into a personal loan. The interest rate is lower than that of a regular loan.

Once completed, the student can also convert this margin into a personal line of credit.

Student credit cards

Student credit cards

Some financial institutions have student credit cards. It is important to be well informed and to shop as there are several possibilities that can be more or less advantageous depending on the student’s situation and interest rates. In general, these are equivalent to those of a normal credit card.

 

Should You Use Your RRSPs to Pay Off Your Debts?

Withdrawing RRSPs before retirement age is never advisable. Withdrawing too early has important consequences that must be taken into account, especially since it is a savings plan designed specifically to be used only at the time of retirement.

Are your debts piled high and the only savings you have on your credit to repay them are those on your RRSPs?

WHAT IS AN RRSP?

WHAT IS AN RRSP?

A registered retirement savings plan (RRSP) is, as its name indicates, a way to save for retirement so as to substantially increase your income after your professional life and thus be able to maintain a lifestyle that suits you .

Anyone in Canada who is 70 years of age or younger and earning income is eligible to contribute to a registered retirement savings plan.

This membership brings several benefits including:

The reduction of taxes, the returns of miscellaneous investments (capital gains, dividends or interest) are not taxable as long as they are invested;

By starting to contribute early, you will earn more money at retirement since a few dollars paid at each of your paydays can be thousands upon retirement;

If your income is high and you contribute to your RRSP on a regular basis, you have access to very attractive tax benefits right now.

It’s only natural that you want to use your RRSPs to pay off your debts, but is that a good idea?

YOUR RRSPs CAN NOT BE SEIZED IF YOU BANKED!

While bankruptcy may not yet be a good idea, knowing your RRSPs are safe from foreclosure (except your 12-month contributions) if this happens should be very reassuring.

Basically, what this means is that if you were forced to declare bankruptcy, the creditors could not under any circumstances withdraw you from your RRSPs. The specific purpose of the Bankruptcy and Insolvency Act is to save your retirement savings. As long as they are placed, these sums are therefore untouchable.

What are the real impacts if you choose to pay off your debts with your RRSP?

What are the real impacts if you choose to pay off your debts with your RRSP?

Here are the good times to withdraw RRSPs before retirement

While it is not advisable to disburse RRSPs before retiring, there are some exceptions. 

If all other possibilities seem out of reach and disbursing your RRSP seems the only remaining option, get help from our partners as soon as possible. It will help you develop an action plan that will save the money saved on your RRSPs from tax and creditors. Do not neglect the importance of these savings for the future!

Check all other debt solutions before sacrificing your RRSPs

Most of the time, using your RRSPs as part of a process to pay off overindebtedness is a very bad idea. It is best to consider all available options before committing an odd.

For example, you can withdraw savings from other types of savings, such as your TFSA. There is the possibility of selling some of your property (a second car, a country house, a cottage or a trailer) to repay the sums due which are the most greedy interest charges. You could also remortgage your home, apply for debt consolidation with your bank to pay less interest than the ridiculously high credit cards, use personal loans to name just a few possible solutions.

No matter what you plan to borrow as a way to get rid of your debts, it is always best to hire a financial professional to help you see more clearly and identify the most interesting options in your situation. particular. He will introduce you to tools to help you manage your finances more effectively and will work out strategies with you to help you avoid falling back into over-indebtedness afterwards.

Before withdrawing money from RRSPs, ask yourself whether you will actually solve your problem. Even if it may seem financially sound, this solution is not necessarily the best avenue to take and it would be heartbreaking if you ransacked your RRSPs, which are protected in the event of bankruptcy, in the end still go through it.

We therefore advise you to seek the advice of a licensed insolvency trustee before anything else. It will objectively analyze your financial troubles so that you can make an informed decision.

Thus, you can know for sure if this is the ideal option in your case to disburse your RRSPs. Otherwise, they will be able to give you all the information you need, whether on the consumer proposal, bankruptcy, voluntary deposit or any other option that may possibly accommodate you.