Anyone familiar with how taking out loans from your 401k works?

[Danny_dan92]

[Laciejordan]

My understanding is a 401k loan gets paid back to yourself, with interest but if you miss ONE payment, it's considered income and you get taxed at the end of the year. Maybe even a penalty on the amount you withdrew for early withdrawal, which is a ridiculous amount. I'm sure I'm not 100% correct but a friend tried to go that route to by a car and it ended up being a disaster.

[Danny_dan92]

Oh damn, that sounds about right. I guess you would have to get it knowing for certain there is no potential of being laid off

[dudeinohio]

Yes.

I've done it. Mine gives me 5 years to pay it back via weekly payroll deductions. Interest goes directly to my account. You pay yourself.

[blueonblack22]

Not a good idea. This is a last resort idea.

Any reason why you want to do this?

[Danny_dan92]

I want to take out a loan to pay off one of my credit cards. The interest for that is around 15%

I imagine the interest for a loan from my 401k would be less.

[blueonblack22]

Do you follow Dave Ramsey by chance? He would advice against this. There could be tax implications.

You might be better of doing a balance transfer to a zero percent teaser on a different credit card and aggressively pay it off before the teaser period is over

[Danny_dan92]

I don’t but I’ll look him up. This is not set in stone just yet. I’m just weighing my options.

I don’t necessarily need to pay off this debt asap but the sooner the better

[blueonblack22]

I like your motivation but definitely check out Dave Ramsey. Some of the best personal finance advice I’ve ever gotten in my life was from him.

[BarryLiverstone]

Ask your financial advisor. There are big penalties if you try that option.

[jahaims]

Cashing out early and taking a loan from it aren't the same thing. Usually, the loan from your 401k has better terms than a standard loan.

[BarryLiverstone]

It this is why I advised him to work with his financial advisor. You have to have discipline to pay back the loan. Clearly he ran up debt on his credit card so he will need some help and accountability to be able to repay any loans he takes from the 401k even if his intentions are to pay down the credit card.

Discipline and financial responsibility are important, right?

[Jennz6]

Stripper’s don’t have a 401k

[Ariesman81]

You got titties don't you?

[Jennz6]

@Ariesman81 yes 💃

[Danny_dan92]

Big ones

[Jennz6]

@Danny_dan92 yes 💃

[Ariesman81]

@jennz6 Same thing

[Jennz6]

@Ariesman81 same answer

[Ariesman81]

@jennz6 stop it