Personal Finance

Do banks consider locked-in assets for line of credit increase?

  • Last Updated:
  • Jan 15th, 2018 10:05 pm
Jan 14, 2018
0 posts

Do banks consider locked-in assets for line of credit increase?

I've been unhappy with my current RBC financial advisor and have been talking to an advisor from another institution about moving my investments over (just a locked-in retirement account at the moment) to that advisor. I've been out of work for a while and have some credit card debts - my new advisor suggested consolidated these debts onto a LOC if I could get approved. I have a home equity LOC with RBC right now.

When my RBC advisor found out I was transferring the funds over, she gave me a call and tried to conserve the money. One of the things she told me is that RBC could hold it against my when trying to get my line up credit increase. Is this true? I would like to work with the new advisor but if it hurts my chances of getting a LOC increase I don't know if I should.
1 reply
Jul 18, 2016
2014 posts
You shouldn't really use registered funds as security. Technically you're actually able to. I forget where I read this but I recall taking it seriously because it was from a reputable source. Apparently, you actually can use registered funds as security, however the moment you do so it is considered a withdrawal from the registered funds by the CRA. You are therefore required to pay taxes on that withdrawal. However, the moment the security is released through repayment of the debt, you're able to put the money back into your RRSP and recover the taxes paid.

I'll try and find the source for this. For the moment you'll have to take my word for this. Sorry.

Anyhow, in your case, it's LOCKED IN - no withdrawals until a certain age/disability etc., is reached. I don't think you can use it as security. So, as far as the bank is concerned, the money doesn't even exist as money that could otherwise be applied to offset a debt in your LOC.

Therefore, holding it against you for approval of limit increases on your LOC, sounds wrong, and I would consider it a dirty trick and promplty end my relationship with that bank.


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