Dirt cheap loan or RRSP withdrawal Answer these tough questions first

TORONTO — Canadians may be tempted to take advantage of low interest rate loans instead of dipping into their RRSPs before retirement to either buy a home or go back to school.But financial experts warn that while it may be difficult to resist the lure of “cheap money” — whether it’s from a bank or your RRSP — both options will come at a cost.“We now have a phenomenon of cheap money,” says Avraham Byers, an adviser with Breakthrough Personal Financial Trainers.The problem is that cheap money isn’t always cheap“With cheap money, it’s easy to say, ’Well I’ll just borrow more and more money.’ We see lines of credit are getting bigger and bigger. The problem is that cheap money isn’t always cheap.”Banks have been dropping interest rates on loans and lines of credit after the Bank of Canada cut its key interest rate to 0.75% in January and many analysts expect the central bank to lower its rate again.But despite the rock-bottom rates, Byers advises clients to be careful with how much debt they take on.“The litmus test on a loan you’re about to take is to imagine that loan, or line of credit, puffed up by 5% or so,” he said.Why slipping on your credit card payments is about to cost you bigger bucks“If you can handle that, then that’s great. But if you can’t handle that amount on there, then that may not be the best thing to do.”Any amount of debt can easily spiral out of control, he added.But if a loan isn’t affordable, that doesn’t necessarily mean that Canadians should automatically dip into their RRSPs to fund expenses.The Canada Revenue Agency permits first-time home buyers to withdraw up to $25,000 tax-free from an RRSP using the federal Home Buyer’s Plan, but that money needs to be paid back within 15 years. If that doesn’t happen, then the money will be added to their income for that tax year.Similarly, those who are going back to school full-time are allowed to withdraw $10,000 a year for a total of $20,000 from their RRSP under the Lifelong Learning Plan. One-tenth of the amount needs to be paid back each year, with the amount completely paid back within 10 years.“You have to understand that if you take money out of an RRSP, you really are taking money from your older self,” cautioned Byers.Mark Thierriault, a financial adviser with Nicola Wealth Management in Vancouver, says RRSP contributors need to do the math.“If you take out a loan from a bank, you have to start paying that back right way and have to pay interest payments,” he said. “With an RRSP withdrawal under the Home Buyers or Lifelong Learning plans, you’re missing out — for however long it takes you to pay it back — on the growth you would’ve gained in that RRSP.”For example, if investments in an RRSP are generating returns of 6%, then it would make sense to keep the funds in that account and take out a loan at 3% interest instead.“Really, it comes down to the level of risk you’re taking in the investment and can you outperform the cost of borrowing,” said Thierriault. read more

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General Assembly President calls for stronger relationship between UN and civil society

Civil society organizations can significantly help the United Nations achieve its development agenda, the General Assembly President said today as she called for a closer relationship between the two and a stronger voice for civil society groups within the world body.Speaking in New York at a forum on the General Assembly and non-governmental organizations (NGOs), which was jointly organized by her office and the UN Foundation, Sheikha Haya Rashed Al Khalifa said civil society groups have been making “a serious contribution” to the UN since its beginnings in 1945.“You are indispensable partners in delivering services to the poor, catalyzing action within countries and holding leaders accountable for their commitments,” she told participants at the forum.“In crisis, post-conflict and post-disaster situations, national and international NGOs are vital implementing partners – without them, UN humanitarian assistance could hardly be delivered.”Sheikha Haya added that world leaders have welcomed the recently enhanced dialogue between UN Member States and civil society, and she commended NGOs for their work in galvanizing public support for UN goals and representing the needs of people on the ground.The General Assembly President said NGOs have also made valuable contributions to the UN’s reform agenda, especially on the issue of gender equality.She announced that over the next year she will convene a series of informal thematic debates involving the private sector and civil society on development, gender and the dialogue among civilizations.The first such debate, to be held next Monday, will consider the progress made so far on reaching the Millennium Development Goals (MDGs), the set of eight internationally agreed targets for reducing key social and economic ills, and examine any obstacles that threaten their achievement.Currently, more than 4,500 NGOs are accredited with the UN. read more

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