Business & Investing
Sponsored by

Taking a loan from a 401K

1,663 Views | 13 Replies | Last: 5 yr ago by aggiehunter3
ForeverAg
How long do you want to ignore this user?
AG
My plan charges $40 to take a small loan from the 401K for a major purchase. I need about 10K. Are there better options out there?

I like that I dont have to do a hard credit pull, and all interest is paid back to me.
Post removed:
by user
AGTX
How long do you want to ignore this user?
AG
Keep in mind that you will be out of the market (for the amount of the loan) and that, depending on your plan rules, you may not be able to make contributions to the 401(k) until the loan is paid in full.

If you're going to do it, it's best to get the loan paid off as quickly as possible. So you can get back to contributing and back in the market.

You typically cannot make early payments , but can pay the entire balance off early. i.e., if the loan is $10k and the loan payment is $100 per pay period you can't make an extra $100 payment each month, but you can pay back the entire loan balance at any time.
AggieT
How long do you want to ignore this user?
AG
You will repay the loan with post tax dollars.
nactownag
How long do you want to ignore this user?
AG
Biggest negative is out of the market and the interest you pay you will be double taxed on. Not a big fan. I'd suggest that you save the money and pay cash.
Aggie@state.gov
How long do you want to ignore this user?
AG
you cannot make contributions to the 401(k) until the loan is paid in full.


Not necessarily true.
aggiedata
How long do you want to ignore this user?
AG
it's tough to do in a rising market.

Plus don't overlook the pay back with after tax money. You are taking pre tax money and replacing it with post tax in a pre tax account and that will eventually get taxed again. (interest would be the difference as you aren't taxed coming out).

AGTX
How long do you want to ignore this user?
AG
You're correct. I'll update that.
AgCPA95
How long do you want to ignore this user?
AG
I also believe if you leave your job (layoff, fired, resign) you will have to pay it back in full pretty much immediately.
The Wonderer
How long do you want to ignore this user?
AG
New credit card with a high limit and 0% is your best route. Or put on a credit card and transfer to a zero promo rate on another.

What about a private loan from your bank?

Loaning from 401k should be your last resort just short of a car title loan.
TXTransplant
How long do you want to ignore this user?
AgCPA95 said:

I also believe if you leave your job (layoff, fired, resign) you will have to pay it back in full pretty much immediately.


The law changed for loans taken after Jan. 1, 2018. You have until October of the following year (the due date of your tax return on extension) to pay the money back.

This grace period does not apply if you take a hardship withdrawal.
AgOutsideAustin
How long do you want to ignore this user?
AG
Don't do it.
- Dave R.
MBUSA
How long do you want to ignore this user?
Only the amount you take out is out of the market; the remainder stays active.
leoj
How long do you want to ignore this user?
AG
You do for mine. Didn't seem like an attractive option when I looked at the terms just out of curiousity.
aggiehunter3
How long do you want to ignore this user?
AG
TXTransplant said:

AgCPA95 said:

I also believe if you leave your job (layoff, fired, resign) you will have to pay it back in full pretty much immediately.


The law changed for loans taken after Jan. 1, 2018. You have until October of the following year (the due date of your tax return on extension) to pay the money back.

This grace period does not apply if you take a hardship withdrawal.


A hardship withdrawal and a 401k loan are 2 completely different items. Hardship withdrawals are not repaid back to the plan.
Refresh
Page 1 of 1
 
×
subscribe Verify your student status
See Subscription Benefits
Trial only available to users who have never subscribed or participated in a previous trial.