401k Loans for April 2024

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Royal Bank of Canada
I appreciate the transparency in the loan terms provided by Royal Bank of Canada, with no hidden fees or charges.
Royal Bank of Canada
RBC provided me with a flexible loan repayment schedule, making it easier to manage.
Royal Bank of Canada
I encountered some hidden fees when repaying the loan with RBC, making it more expensive than I expected.
Royal Bank of Canada
Unfortunately, the loan terms offered to me by RBC turned out to be less favorable than those of other banks.
Royal Bank of Canada
It's very convenient to use RBC's online services to manage my loan and make monthly payments.
Royal Bank of Canada
I obtained my home loan with RBC, and they were very flexible in setting terms that suited my financial capabilities.

What is a 401k Loan?

In the Canadian context, a 401(k) loan equivalent is not precisely mirrored, but Canadians have a comparable option through the use of Registered Retirement Savings Plans (RRSPs). While 401(k) plans in the United States allow any individual to borrow money from their retirement account, RRSPs in Canada do not offer the same loan feature. Instead, Canadians can make early withdrawals from their RRSP under certain circumstances, such as through the Home Buyers' Plan or Lifelong Learning Plan, allowing them to access funds for a first home purchase or education expenses without incurring the typical early withdrawal penalties.

While RRSPs provide flexibility for early withdrawals, such transactions may be subject to withholding tax and income tax. The absence of a direct loan mechanism distinguishes the Canadian approach from the U.S. 401(k) loan system, emphasizing the unique features of each country's retirement plan framework.


In Canada, the equivalent retirement savings vehicle to the U.S. 401(k) is the Registered Retirement Savings Plan (RRSP). Here are some key features of the RRSP:

  1. Tax-Advantaged Contributions. Similar to a 401(k), contributions to an RRSP are made with pre-tax dollars, providing individuals with immediate tax benefits. Contributions are tax-deductible, reducing taxable income for the year.

  2. Government Oversight. RRSPs are registered with the Canadian government and are overseen by the Canada Revenue Agency (CRA). The CRA sets rules on annual contribution limits, timing, and allowable investments.

  3. Vested Account Balance. RRSP holders can accumulate a vested account balance, representing the portion of the account that fully belongs to them, including both contributions and investment growth.

  4. Loan Payments. RRSPs provide options for certain withdrawals, such as those under the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP), which may involve specific repayment schedules or loan payment conditions

  5. Tax-Deferred Growth. Investments within an RRSP grow on a tax-deferred basis. Income earned through capital gains, dividends, and interest is not taxed until funds are withdrawn.

  6. Wide Range of Investment Options. RRSP holders can choose from various eligible investments, including cash, savings accounts, GICs (Guaranteed Investment Certificates), mutual funds, stocks, bonds, and ETFs.

  7. Income Splitting. Contributions to a spousal RRSP can be utilized for income splitting, helping to reduce the overall tax burden if one partner earns more than the other.

  8. Withdrawal Options. While withdrawals are generally taxed, RRSP holders have the flexibility to make withdrawals at any time, though some funds may be withheld as a prepayment of income tax.

  9. Maturity and Conversion. By the end of the year the account holder turns 71, the RRSP must be converted into a Registered Retirement Income Fund (RRIF), annuity, or withdrawn as a lump sum.

Pros and Cons


Tax Advantages. Contributions to RRSPs are tax-deductible, providing immediate tax benefits. This can result in lower taxable income for the year of contribution.

Interest Payments. Investment gains within RRSPs grow tax-deferred, allowing for the potential accumulation of interest without immediate tax implications.

Contribution Flexibility. RRSPs offer contribution flexibility, allowing individuals to contribute up to their contribution limit each year or carry forward unused contribution rooms. For example, en employer establishes a Group RRSP for its employees, financing it through payroll deductions, similar to the structure of a 401(k) plan in the United States. Managed by an investment manager, this plan provides contributors with the immediate benefit of tax savings.


Early Withdrawal Penalties. While there are options like the HBP and LLP, early withdrawals for other purposes may incur withholding tax and income tax, diminishing the benefits of tax-deferred growth.

Investment Restrictions. Investments are subject to restrictions based on what the plan issuer offers, limiting the choice of investment options compared to a self-directed investment portfolio.

Limited Access to Contributions. Once contributed, funds are generally intended for retirement, and early withdrawals outside of specified programs may result in penalties.

How to Get a 401k Loan

Apply for a Loan

In Canada, the equivalent of a 401(k) loan is not available directly through Registered Retirement Savings Plans (RRSPs). Unlike the U.S. 401(k), RRSPs do not provide a loan feature. However, Canadians have alternative options to access funds from their RRSPs under certain circumstances. Here are two programs that allow for withdrawals:

  1. Home Buyers' Plan (HBP). Canadians can withdraw up to $35,000 from their RRSP to buy or build a first home under the HBP. Withdrawals under the HBP are not subject to withholding tax, and the amount can be repaid into the RRSP over 15 years, starting the second year after withdrawal. This provides a way to use RRSP funds for homeownership without incurring early withdrawal penalties.

  2. Lifelong Learning Plan (LLP). The LLP allows RRSP withdrawals of up to $20,000 to finance full-time education or training for the account holder or their spouse. Similar to the HBP, withdrawals under the LLP are not subject to withholding tax, and the amount must be repaid to the RRSP over 10 years. This offers an avenue to fund education without immediate tax consequences.


Home Buyers' Plan (HBP)

  1. First-Time Homebuyer. To qualify for the HBP, an individual must be considered a first-time homebuyer. This means they have not owned a home and occupied it as their principal residence within the four years before the withdrawal.

  2. RRSP Ownership. The funds for the HBP must be withdrawn from an RRSP account that is in the name of the account holder, their spouse, or common-law partner.

  3. Intention to Occupy. The homebuyer must intend to occupy the home as their principal residence within one year after buying or building it.

Lifelong Learning Plan (LLP)

  1. Enrolled in a Qualifying Program. The individual or their spouse must be enrolled or have received an offer to enroll before March of the following year in a qualifying educational program at a designated educational institution.

  2. Full-Time Enrollment. To participate in the LLP, the individual must be a full-time student or enrolled in a specified educational program on a part-time basis. The program must last for at least three consecutive months.

  3. RRSP Ownership. The funds for the LLP must be withdrawn from the RRSP account of the individual or their spouse.


Home Buyers' Plan (HBP)

  1. Maximum Withdrawal Limit. The HBP allows a maximum withdrawal of up to $35,000 from an RRSP, regardless of the amount available in the account.

  2. Repayment Conditions. While the withdrawal is not subject to immediate taxes, it must be repaid to the RRSP over 15 years, starting the second year after withdrawal.

  3. Written Agreement. The homebuyer must have a written agreement to buy or build a qualifying home. This agreement should be signed by the homebuyer and a person selling the home who will not be living in the home after the purchase.

Lifelong Learning Plan (LLP)

  1. Enrollment in a Qualifying Program. The individual or their spouse must be enrolled or have received an offer to enroll before March of the following year in a qualifying educational program at a designated educational institution.

  2. Maximum Withdrawal Limit. The LLP allows a maximum withdrawal of up to $20,000 from an RRSP, with annual limits set by the Canadian government.

  3. Repayment Conditions. Similar to the HBP, funds withdrawn under the LLP are not immediately taxed, but they must be repaid to the RRSP over a 10-year period.

  4. Written Confirmation. The educational institution must provide a written confirmation of enrollment or offer to enroll, and this confirmation must be submitted to the Canada Revenue Agency (CRA) along with the LLP withdrawal request.

Best Places to Get a 401k Loan

  1. RBC Royal Bank offers an RRSP loan with attractive rates and terms, providing a great avenue to maximize RRSP savings. Borrowers can access flexible limits, with the option to borrow up to $50,000 to contribute to a single year's RRSP or catch up on missed contributions from previous years. The interest rate is as low as the Prime Rate, and repayment terms range from 1 to 10 years. Additionally, borrowers enjoy deferred repayment options for up to 90 days, allowing the use of tax rebates to repay the loan. With easy payment options, including monthly, semi-monthly, bi-weekly, or weekly payments, and no early prepayment charges, RBC Royal Bank's RRSP loan offers versatility and convenience.

  2. National Bank provides RRSP loans or lines of credit, offering the opportunity to leverage the Home Buyers' Plan (HBP) for purchasing a first home or the Lifelong Learning Plan (LLP) for educational pursuits. Borrowers can take out an RRSP loan or line of credit, invest the borrowed amount in their RRSP, and keep it there for 90 days. After this period, they can withdraw the required funds, contributing to a down payment or financing their studies. The tax refund from the RRSP contribution can be used for these purposes. Repayment terms extend up to 15 years for HBP and up to 10 years for LLP, providing flexibility. It is advised to consult with financial professionals to determine the suitability of this strategy.

  3. Manulife Bank's RRSP loan encourages individuals to make the most of their RRSP contribution room. With no application fees, flexible payment options, and the ability to make lump-sum payments without charges, Manulife Bank provides a cost-effective solution to grow money tax-deferred for retirement. Borrowers can access a wide range of investments, including Manulife Bank’s Registered Advantage Account and Guaranteed Investment Certificates (GICs), along with offerings from Manulife Investments and Manulife Securities. This diversity allows individuals to tailor their RRSP investments to their financial goals.

  4. HSBC's RRSP Loan is designed to help individuals maximize their RRSP contributions, particularly if they haven't reached their limit. With competitive interest rates and 1- to 5-year terms, borrowers can catch up on missed contributions from previous years while benefiting from tax advantages. The loan offers flexibility with weekly, bi-weekly, or monthly payment options, providing convenience for borrowers as they save for retirement.

Ways to Receive the Money

  1. Direct Transfer to Bank Account. Once eligible for a withdrawal under the HBP or LLP, individuals may have the option to have the funds directly transferred to their bank account. This electronic transfer ensures quick and convenient access to the withdrawn amount.

  2. RRSP Account Withdrawal. In certain cases, individuals may choose to keep the withdrawn funds within their RRSP account rather than transferring them to a bank account. This can be done if the funds are intended for investments or other purposes within the RRSP.

  3. Home Purchase or Education Payments. For specific use cases like home purchases or education payments under the HBP or LLP, the funds may be directly paid to the seller of the home or the educational institution, bypassing the individual's bank account.

Things to Pay Attention to

  1. Eligibility Criteria. Understand the eligibility requirements for the HBP or LLP, ensuring that you meet the specific conditions, such as being a first-time homebuyer or enrolled in a qualifying educational program.

  2. Withdrawal Limits. Be aware of the maximum allowable withdrawal limits under the HBP ($35,000) and LLP ($20,000) and ensure compliance with annual and overall limits.

  3. Repayment Obligations. Understand the repayment conditions for both plans, including the repayment period (15 years for HBP, 10 years for LLP) and the consequences of non-compliance.

  4. Tax Implications. While withdrawals under HBP and LLP are not immediately taxed, understand the potential tax implications and plan for any taxes that may arise if repayments are not made as required.

  5. Method of Receiving Funds. Choose the most suitable method for receiving the withdrawn funds, such as direct transfer to a bank account, cheque issuance, or electronic funds transfer (EFT).

  6. Impact on Retirement Savings. Consider the impact of the withdrawal on your overall retirement savings and assess whether it aligns with your long-term financial goals.

  7. Investment Implications. If the withdrawn funds are to be reinvested within the RRSP or used for other investments, evaluate the potential impact on your investment strategy and portfolio.

  8. Documentation Requirements. Ensure that you have all necessary documentation in place, including written agreements for home purchases or educational confirmations for LLP, to support your withdrawal request.

  9. Communication with Financial Institution. Communicate with your financial institution to understand their specific processes, timelines, and any fees associated with the withdrawal.

  10. Professional Advice. Seek advice from financial advisors or tax professionals to fully comprehend the implications of the withdrawal on your financial situation and to make informed decisions.

  11. Alternative Financing Options. Explore alternative financing options, such as personal loans or lines of credit, to assess whether they may be more suitable for your needs.

How to Repay a 401k Loan

  1. Home Buyers' Plan (HBP) Repayment. For HBP, the repayment process begins in the second year after the withdrawal. You will receive a Notice of Assessment from the Canada Revenue Agency (CRA) indicating your HBP balance and the minimum required repayment for the year. The annual repayment amount is typically 1/15th of the total withdrawal. For example, if you withdrew $15,000, the minimum annual repayment would be $1,000. Make the repayment by contributing the required amount back into your RRSP by the deadline specified in your Notice of Assessment.

  2. Lifelong Learning Plan (LLP) Repayment. For LLP, the repayment period begins five years after the first LLP withdrawal. Similar to HBP, you will receive a Notice of Assessment outlining the minimum required repayment for the year. The annual repayment amount is usually 1/10th of the total withdrawal. For instance, if you withdrew $10,000, the minimum annual repayment would be $1,000. Contribute the required amount back into your RRSP by the deadline specified in your Notice of Assessment.

  3. Repayment Flexibility. While there are minimum annual repayment amounts, you have the flexibility to repay more than the minimum if you choose, and this can help reduce the overall repayment period. You can also pay back the loan sooner without being subject to prepayment penalties.

  4. Deadline for Repayment. Repayments must be made by the filing due date of your tax return for the year indicated on your Notice of Assessment.

  5. Tax Consequences of Non-Repayment. Failure to make the required repayments may result in the withdrawn amount being included in your income for the year, subject to taxation.

  6. Record Keeping. Keep detailed records of your repayments and Notices of Assessment for future reference and to ensure compliance.

Reasons for Getting Rejected for a 401k Loan

  1. Not Meeting Eligibility Criteria. If you don't meet the specific eligibility criteria for the HBP or LLP, such as being a first-time homebuyer for HBP or enrolled in a qualifying educational program for LLP, your withdrawal request may be rejected.

  2. Exceeding Withdrawal Limits. Each program has maximum withdrawal limits ($35,000 for HBP and $20,000 for LLP). If your requested withdrawal exceeds these limits, it may be rejected.

  3. Incorrect Documentation. Providing inaccurate or incomplete documentation, such as a lack of written agreements for home purchases or educational confirmations for LLP, may lead to rejection.

  4. Failure to Repay Previous Withdrawals. If you have outstanding repayments from a previous HBP or LLP withdrawal, or if you haven't met your repayment obligations, it could impact your eligibility for future withdrawals.

  5. Withdrawal Outside Designated Periods. Requests for withdrawals outside the designated periods specified in the HBP or LLP guidelines may result in rejection.

  6. Failure to Provide Proof of Home Purchase or Education Enrollment. For HBP and LLP, you are required to provide proof of home purchase or educational enrollment. Failure to provide such proof may lead to rejection.

  7. Not Filing Taxes. Regularly filing your income taxes is crucial for participating in these programs. If you do not pay income taxes, your request may be rejected.

  8. Non-Compliance with Repayment Conditions. If you fail to make the required repayments according to the schedule outlined by the Canada Revenue Agency (CRA), it may impact your eligibility for future withdrawals.

  9. Attempting to Use Funds for Non-Qualifying Purposes. If you attempt to use the funds for purposes other than those specified in the HBP or LLP, your request may be rejected.


  1. Home Equity Line of Credit (HELOC). A HELOC allows homeowners to borrow against the equity in their homes. It provides a revolving line of credit that can be used for various purposes, including home renovations or other financial needs.

  2. Personal Loan. Unsecured personal loans are offered by financial institutions and can be used for a variety of purposes, such as consolidating debt, making large purchases, or covering unexpected expenses.

  3. Auto Loan. If purchasing a vehicle, an auto loan can provide financing for the purchase. These loans are specifically designed for buying a car and may offer competitive interest rates.

  4. Home Equity Loan. Similar to a HELOC, a home equity loan allows individuals to borrow against the equity in their homes. However, unlike a HELOC, it provides a lump sum payment with a fixed interest rate.

Editorial Opinion

In the Canadian financial landscape, the absence of a direct equivalent to the 401(k) loan, as seen in the United States, reflects the distinctive nature of the Canadian retirement savings system. While Canadians can access funds from their Registered Retirement Savings Plans (RRSP) for specific purposes like home purchase or education through programs like the Home Buyers' Plan (HBP) and Lifelong Learning Plan (LLP), these are not traditional loans. Instead, they involve withdrawals with defined repayment conditions. The lack of a true 401(k)-style loan option in Canada may be viewed neutrally, emphasizing the importance of understanding and adhering to the specific regulations governing RRSP withdrawals for various financial purposes.


Keeping your Debt-to-Income (DTI) ratio below 30-40% of your monthly income is crucial. This will help you avoid potential financial problems in the future. Additionally, always assess the necessity and feasibility of taking a loan, ensuring you can comfortably manage its repayment.

How to Choose a Lender

  1. Make sure to confirm whether the lender is licensed to operate in your province. You can verify this information with your state regulator or attorney general.

  2. Check if the lender is a member of a reputable association, such as the Canadian Lenders Association (CLA). Membership in such organizations may provide an extra level of reliability.

  3. Carefully review all the terms and conditions of your payday loan contract.

  4. Thoroughly examine the interest rates on payday loans and ensure that your contract includes a detailed breakdown of the total cost of the loan.

  5. Take advantage of your right of rescission. Usually, you can rescind the loan within three days after signing the agreement. Alternatively, there is typically a "cooling-off" period, which allows you several days to thoroughly review the contract before making an informed decision to enter into a consumer loan agreement based on the terms specified by the lender.

  6. Choosing a payday lender is a significant decision that demands careful consideration and a good understanding of how such organizations operate.


At Finanso, we've carried out a comprehensive analysis of over 70 lenders, assessing them based on 35 different parameters across six key categories: accessibility of loans, customer relations, quality of service, interest rates, and transparency of conditions.

In each category, we carefully considered the most critical factors in selecting a lender. These factors include the interest rates, available loan amounts, minimum credit score, minimum income, application fees, and the speed at which funds are transferred.

At Finanso, we highly value our users, which is why we also focus on the quality of customer service, user reviews, and additional features that can aid our users in making a well-informed decision.

Our ultimate goal is to provide insightful recommendations and expert advice to assist you in selecting a lender that best caters to your specific needs.


Should I borrow from my 401k to pay off debt?

Deciding whether to borrow from a retirement savings account, such as an RRSP in Canada, to pay off debt is a complex financial decision that requires careful consideration of various factors. While RRSPs offer specific withdrawal programs like the Home Buyers' Plan (HBP) and Lifelong Learning Plan (LLP) for designated purposes, they are not designed as traditional loan instruments. Borrowing from your RRSP to pay off debt may have implications for your long-term retirement savings. It's crucial to weigh the benefits of debt reduction against potential drawbacks, including the impact on your retirement funds, potential taxes, and the obligation to repay the withdrawn amounts under specific conditions.

Before making such a decision, individuals should explore alternative debt repayment strategies, such as budgeting, negotiating with creditors, or seeking financial counseling. Additionally, consulting with a financial advisor can provide valuable insights into the overall financial implications, potential tax consequences, and alternative solutions that may better align with both short-term debt management and long-term retirement goals.

Do 401k loans affect your credit score?

In Canada, there is no direct equivalent to the 401(k) loan as seen in the United States. However, withdrawals from Registered Retirement Savings Plans (RRSPs) for specific purposes, such as the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP), may impact your credit indirectly. When you access funds from your RRSP, it doesn't directly influence your credit score since these withdrawals are not loans and do not involve credit checks. The HBP and LLP are structured to assist with home purchases and educational expenses, respectively, and are not reported to credit bureaus.

While RRSP withdrawals for designated purposes do not impact credit scores, other forms of borrowing, such as personal loans or lines of credit, can affect your creditworthiness. When considering financial decisions that involve debt or withdrawals from retirement accounts, individuals are encouraged to consult with financial advisors to understand the broader implications on their overall financial health, including credit considerations.

Can I borrow 100% from my 401k?

In Canada, there isn't a direct equivalent to the 401(k) loan as seen in the United States. However, under certain circumstances, individuals can access funds from their Registered Retirement Savings Plans (RRSPs) for specific purposes such as the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP). While these programs allow for the withdrawal of funds, borrowing 100% of your RRSP balance is not typically permitted. The HBP, for instance, has a maximum withdrawal limit of $35,000, and the LLP allows for a maximum withdrawal of $20,000.

Accessing funds from an RRSP under these programs involves specific eligibility criteria, conditions, and repayment obligations. These withdrawals are not akin to traditional loans with no set interest rates, and the borrowed amounts must be repaid within specified timelines.

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