# TFSA deposits as collateral



## Patricia (Apr 3, 2009)

Hi there,
Just wondering if anyone knows if TFSA deposits can be used to secure a line of credit or personal loan? I've looked around and from what I'm seeing it would seem that it is a personal decision on the part of the lending institution. I searched the gca sight but found no reference to this. Thanks for any light you can shed on this.


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## OhGreatGuru (May 24, 2009)

"Secured" is probably a poor choice of words. Since you could withdraw the TFSA funds and spend them at any time, what security does the lender have?

Having funds in a TFSA might affect your overall credit worthiness/rating, making it easier to borrow.

Why would you take out consumer debt when you have money sitting in the bank?


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## Sampson (Apr 3, 2009)

OhGreatGuru said:


> Why would you take out consumer debt when you have money sitting in the bank?


Doesn't have to be consumer debt, I don't think the OP lists the purpose of the borrowed money?

I'm interested in whether others have experience with this and have been too lazy to go to the bank.

I want to start some leveraged investing, but don't want to setup a HELOC until my current mortgage term expires.


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## Patricia (Apr 3, 2009)

We are going to co-sign a line of credit for our daughter who is returning to grad school in the fall. The purpose of securing it with TFSA funds is to get the best rate possible for the LoC.


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## the-royal-mail (Dec 11, 2009)

How much do you want the LOC to be? How much do you have in TFSA? Is there much difference between the two? If not, why not simply use the TFSA funds? Why make this complicated? You'll be paying out more in interest on the LOC than you'll be getting in the TFSA.


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## Sampson (Apr 3, 2009)

Patricia said:


> We are going to co-sign a line of credit for our daughter who is returning to grad school in the fall. The purpose of securing it with TFSA funds is to get the best rate possible for the LoC.


Would she qualify for a student loan? That might be easier, and the interest will be deferred.


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## Patricia (Apr 3, 2009)

The loan is for $11,000 interest rate on line of credit would be 3.5% and is a variable rate the interest on the term deposits is 3.75%. Our daughter would be the one paying the interest on the line of credit as the loan is *hers not ours.* As I mentioned she needs a co-signer(s) and by securing her line of credit for her she gets a better rate. 
The money in our TFSA's is what we call 'deep reserves' we have other securities that we can utilize for emergencies should we need them. We would prefer to use the TFSA money as a security rather than other savings because tying up non tax free dollars makes no sense to me. Over time the plan is to move the non tax free savings into the TFSA's as we accumulate the room. To make a long story short, we covered most of her costs for her BA but this is now a second degree and we do not want to lend her the money as she should be building her credit rating. We have no doubts that she will be able to meet the interest payments when she starts drawing on the line of credit as she has in the past worked while pursuing her education and plans to continue. Her degree is in Theatre studies but in the back stage stuff. She has just finished a year of work as a stage carpenter but her degree allows her to apply for work in design, lighting, as a stage manager and more. As well as a grad student she hopes to get some work as a teaching assistant at the university and has taught courses to elementary and secondary students in theatre arts in the past. Hope this helps everyone understand the situation.


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## Patricia (Apr 3, 2009)

She is going to apply for a student loan as well. Her plan is to have the line of credit in place so that when the time comes to start paying back the student loan she can use the line of credit to do so leaving only the line of credit to pay off. She will not use the line of credit until then. It is our understanding that a student loan will be more expensive than a line of credit. Since she will be moving to BC and we are in Ontario having some back up money available should she need it would also be advantageous. Her masters will take her two years to finish.


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