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.

"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 per cent 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 five per cent or so," he said.

"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 six per cent, then it would make sense to keep the funds in that account and take out a loan at three per cent 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.