5C’s for Clients to Consider Before Assuming an RRSP Loan

When clients are considering an RRSP loan, they can use these 5C’s or five measures to help them gage whether or not this strategy would be viable for their retirement savings.

Here are the 5C’s to consider before assuming an RRSP loan:

1. Capacity

This is the estimated amount of debt a borrower cab carry, and is determined by a mathematical calculation known as their Total Debt Service Ratio (TDSR).

2. Capital 

This is the measure of a borrower’s net worth and demonstrates the ability to manage one’s finances and accumulate assets while repaying debt obligations. Do I have sufficient financial resources?

3. Collateral  

Can my assets back up my debt?

4. Credit History 

What is my current debt and how have I managed my debt in the past?

5. Character

What is my repayment history and am I responsibile enough to stick to a repayment schedule?