I took a loan out a couple of years ago to assistance my partner get out of a little monetary difficulty as well as it worked out great. we paid myself behind with interest. Now we wish to do a same for myself, as well as we listen to people observant NOT to do it? If it helps me out, as we cut up my cards in a routine so they can't be used, because is it so bad?
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The main reason is because your money is not working for you in your 401K if you take it out in the form of a loan. With the market down right now, you have to redeem more shares to get the same amount of money you could take out a year ago. By the time you pay back the loan, the market might be higher, so you could be buying back your shares for a higher price.
A second reason was already pointed out to you in the previous answer. If you lost your job, the loan would become due immediately. And, if you could not pay it back all at once, you would have a premature distribution on your hands, subject to regular income tax plus a 10% penalty.
A third reason is that you might not learn how to change your spending habits, and once you pay off the credit cards with the 401K loan, you might end up running up those balances again. This is what happens to about 90% of folks who pay off their credit cards with home equity loans, so why would a 401K loan be any different?
It would be a better financial lesson for you to feel the pain of paying down your credit card balances from discretionary funds, leaving your 401K intact. It will take longer and be more difficult, and that makes it more likely you will learn a valuable financial lesson.
Whatever you decide, good luck to you! Wishing you every financial success.
It is perfectly fine…. as long as you don't get laid off and lose your job.
The loan comes due immediately if you are no longer employed.
Right now it would mean that you are paying yourself back with interest and have a chance to accumulate a lot of cheap stock faster.
Once that market turns that stock will gain in value and you have more shares since you are paying back your loan plus your normal contributions.
If your job is safe…. go for it.
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