Should I borrow $10,000 from my 401(k) at 6% to pay off some debt? I can pay it back in 2 years.?

Question

Should I borrow $10,000 from my 401(k) at 6% to pay off some debt? I can pay it back in 2 years.?

Answer 1

Weigh this - Will the amount of interest on a 10k loan equal what you will lose when taking out of your 401k? If not, then I would suggest taking out a loan from a bank, finding the lowest possible interest rate that you can, and paying that off. As long as you work and can pay off the loan within a 2 year period, or maybe stretch it over 5 years, then do that. It is much better then taking out of your 401k. Really, you should never have to resort to touching the 401k until you are ready to retire.  

Answer 2

do what you gotta do. my gramps did it. lol

Answer 3

Well in two year u many not have a home u many be living on the street. So don't use that money.

Answer 4

this is generally an unwise decision, if for any reason you should loose your job that money will need to be paid back immediately or you will face interest and penalties on it.  Do this only as a last resort, if you do do it pay it back in the shortest amount of time possible and keep contributing to your 401k in the process. Check out this site for advantages and disadvantages: http://www.360financialliteracy.org/Life...

Answer 5

Probably not unless it is an emergency and you cannot get the money from any other source.  

Answer 6

That would be $10,000 PLUS a 20% penalty for early withdrawl = $12,000

$12,000 borrowed at 6% COMPOUNDED INTEREST for 2 years.

You would be paying $531.85 per month for 2 years which would be a total of $12,764.40 to break even to pay back your $10,000 loan from your 401k.

That is a negative 26% return on your investment each year for two years.

Meanwhile your 401k could be losing money on its investments.

Can you afford all of that? I doubt it, but maybe you can.

Answer 7

Make sure you can pay back the money.

Answer 8

Yes.  What is there to think about, the 6% goes back to you.  Get rid of all your credit card debt.  But you have to make sure you pay yourself back.

Answer 9

i dunno..should you

Answer 10

Two things to think about is, how secure is your job, and do you realize that you will pay tax twice on that borrowed money and interest?

If you leave your employer or are terminated, the loan balance would be due almost immediately, or would be considered a distribution subject to tax and 10% penalty.

The loan and interest are paid back with after-tax money (no deduction for any reason).  That money is taxed again when distributed during retirement.

Answer 11

Avoid dipping into you retirement at all costs!!  Your money is worth so much more in the account because it will earn more money.