The Wealthsimple app on a smartphone.Giordano Ciampini/The Canadian Press
Wealthsimple is introducing a new take on loans for RRSPs, part of the Toronto-based fintech’s broader push into retirement planning.
The loan product was announced Wednesday at an event unveiling a suite of new investment offerings. It is intended to help Canadians invest earlier in life, at a time when traditional paths to retirement and building wealth, such as homeownership, are increasingly out of reach for many, the company said.
“The opportunity to actually have the biggest return on leverage is actually when you’re younger,” said Paul Teshima, Wealthsimple’s chief commercial officer, in an interview ahead of the event. “But it’s actually backwards because usually you have the most money to invest when you’re older.”
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The RRSP loan is Wealthsimple’s first product under a larger initiative the company calls its “retirement accelerator.” It is expected to launch in the first quarter of 2026, and interested clients must work with a Wealthsimple adviser. The company did not share information about other products under the initiative.
An RRSP loan allows an individual to borrow money to contribute to that registered plan, helping them maximize their contribution room and benefit from a larger tax refund. Generally, if the RRSP’s growth rate is higher than the interest rate of the loan, taking out a loan can make financial sense.
At major banks, RRSP loans are typically not secured against existing assets and based on a borrower’s credit history, with approval and loan size tied to their credit score. Wealthsimple is taking a different approach: Its loans will be backed by a client’s existing investments rather than their credit history.
This structure, known as a restricted margin loan, is collateralized by the client’s assets, such as those held in non-registered or tax-free savings accounts. This can make it easier for people without Canadian credit scores, such as newcomers, to access the product, the company said.
“What that allows you to do is basically borrow against your assets, unlocking the value of those assets and investing into the RRSP at a lower interest rate,” said Swapnil Parikh, vice-president of product at Wealthsimple.
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The size of the loan depends on the amount and volatility of the client’s assets. “If a customer has highly volatile assets, we will not lend against them because we don’t want to put the customer in a margin call position,” Mr. Parikh said.
“That is particularly important because the last thing you want is a margin on your RRSP that might require you to sell RRSP investments, withdraw them and pay down the loan,” said Jason Heath, the managing director of Objective Financial Partners in Markham, Ont.
Generally, RRSP loans let an individual borrow as much as $50,000 with a term of five to 10 years, according to rate comparison site Ratehub.ca. “I haven’t seen that limit move much in the last 20 years,” Mr. Heath said.
Wealthsimple plans to change that. For example, a client with $1-million in diversified ETFs spread across a non-registered account and a TFSA could borrow as much as $280,000.
“That is definitely far beyond what you see out there on the market,” Mr. Heath said.
Repayment terms will also be more flexible than at traditional institutions, Mr. Parikh said. Borrowers can make monthly or lump-sum payments or pay on an ad hoc basis. Wealthsimple expects most clients will use their tax refunds to pay down the loan.
Mr. Heath called the flexible repayment schedule “novel.” Typically, clients must make monthly payments on RRSP loans.
If a borrower is unable to repay the loan, Wealthsimple said, there are two options: move existing investments into their RRSP to pay off the balance or slow down their repayment schedule.
Interest rates will range from 4.2 to 5.2 per cent, depending on the client’s assets, and fluctuate with the Bank of Canada’s overnight rate. Traditional RRSP loans are often around the prime rate, which is currently at 4.7 per cent; for example, CIBC‘s RRSP loan currently has an interest rate of prime plus 1 per cent.
“If you’re borrowing at 5 per cent and investing at 5 per cent, it’s sort of a wash,” Mr. Heath said. “You always need to be careful about borrowing.”