Jump to content

Sign in to follow this  
helpmeout

Is it smart to borrow money from 401k?

Recommended Posts

I could really use a grand right now and my retirement has 6k so far. I just want to pay of some credit cards. I use the calculator on the my retirement website and it said I just have to pay 9.89 semi monthly meaning 2 times a month which is 19.78 for a month for 5 yrs or I could do 3 yrs loan and pay 15.42 per paycheck meaning 30.84 a month which isn't to much.

Edited by helpmeout

Share this post


Link to post
Share on other sites

55 minutes ago, helpmeout said:

I could really use a grand right now and my retirement has 6k so far. I just want to pay of some credit cards. I use the calculator on the my retirement website and it said I just have to pay 9.89 semi monthly meaning 2 times a month which is 19.78 for a month for 5 yrs or I could do 3 yrs loan and pay 15.42 per paycheck meaning 30.84 a month which isn't to much.

I don't mean borrow but take out a loan from my 401k.

Share this post


Link to post
Share on other sites

If you leave the company the "loan" will become immediately payable in full.  If you can't repay it, it will count as a withdrawal and you will pay taxes and penalties.

 

401(k) loans are for true desperation, unless you have almost zero chance of being fired, laid off or quitting.

 

It's a relatively small risk for $1,000, but I'd rather pay credit card interest.  Can you get a decent BT card?

Share this post


Link to post
Share on other sites

The rates on the 401k loan will be 7% compare to the 23% I am paying on my card. BT cards won't help out as I am still paying for it.... It just stops the interest rate from piling up for a while and I am done with credit cards as I have already to many credit cards which is 8 cards including bank of america that I forgot to put on my sig.

Share this post


Link to post
Share on other sites
24 minutes ago, helpmeout said:

The rates on the 401k loan will be 7% compare to the 23% I am paying on my card. BT cards won't help out as I am still paying for it.... It just stops the interest rate from piling up for a while and I am done with credit cards as I have already to many credit cards which is 8 cards including bank of america that I forgot to put on my sig.

The purpose of a BT card is to move the balance to a low APR (as low as 0%) while you pay it off.

 

"Too many credit cards" is a weak excuse for taking on a risky loan instead of getting a low-APR or 0% BT card, which is even better anyway.  You didn't answer my question as to whether you can get one.

 

I have 26 open credit cards and don't carry balances on any of them.

 

Share this post


Link to post
Share on other sites

If there is really only a thousand dollars at issue, then the issue is NOT 'too many' cards (there is no such thing for responsible adults).  Rather, the problem is a lack of proper savings.  A thousand dollars should NOT be a problem to withdrawn from personal savings precisely because there SHOULD be well over that in emergency amounts. 

 

NEVER revolve a balance that would incur ANY amount of interest if not paid in full. 

 

Rather than dealing with trying to borrow from retirement, you would do better to BT the thousand over to an account with a lower interest rate.  Even accounting for a two to three percent fee, it should still be less than you would be paying in interest to the card with willy-foofoo rates.  And definitely less than the prospective penalty you might face for the 401K if the loan was not paid ASAP.  NEVER make minimum payments if interest is involved!  NEVER! 

Share this post


Link to post
Share on other sites

The problem I see is the $1K will be gone but the repayment will linger for years, meanwhile the card gets charged right back up again.  That's not a reflection on you, it's just a very common outcome.  I'd wander over to a local Credit union and see what they'll do for debt consolidation if that is your goal.  Pay them off and don't carry balances, put what you can aside for savings, you know the drill. 

Share this post


Link to post
Share on other sites
On 8/12/2018 at 1:40 AM, helpmeout said:

The rates on the 401k loan will be 7% compare to the 23% I am paying on my card. BT cards won't help out as I am still paying for it.... It just stops the interest rate from piling up for a while and I am done with credit cards as I have already to many credit cards which is 8 cards including bank of america that I forgot to put on my sig.

There's usually other fees associated with a 401k loan in addition to the interest. The headlamp at the end of the tunnel is you get a small portion of the interest as a gain on the 401k. The oncoming train is that you'll lose any potential market gains while that money is out of your account.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Today's Birthdays

    1. black2002ls
      black2002ls
      Age: 36
  • Member Statistics

    • Total Members
      176,896
    • Most Online
      1,528

    Newest Member
    ksheree
    Joined

About Us

Since 2003, creditboards.com has helped thousands of people repair their credit, force abusive collection agents to follow the law, ensure proper reporting by credit reporting agencies, and provided financial education to help avoid the pitfalls that can lead to negative tradelines.
×
×
  • Create New...

Important Information

Guidelines