Why is it so bad to take a 401k loan to help eliminate credit card debt?
I took a loan out for some years one to help my girlfriend out of some financial problems and that worked wonderfully. I paid with interest. Now I want to do the same for me, and I hear people saying NOT to do? If you help me, as I cut my card in the process so that you can not use, why is it so bad?
The main reason is because their money is not working for you in your 401K if taken in the form of a loan. With the market so far, you have to redeem more shares to raise the same amount of money could take out a year ago. By the time you pay the loan, the market could be larger, so you could buy back their shares at a price higher. A second reason already stated to you in the previous answer. If you lost your job, the loan would become due immediately. And, if I could not return all at once, there would be a premature distribution in their hands, subject to ordinary income tax plus a penalty of 10%. A third reason is that you can not learn to change their spending habits, and once you pay the credit cards with a loan of 401K, stocks could end up running again. This is what happens with 90% of people who pay their credit cards with home equity loans, why would a 401K loan to be different? It would be a financial lesson better than feeling the pain of paying down your credit card balances of discretionary funds, leaving intact their 401K. It will take longer and be more difficult, and that makes it more likely that you will learn a valuable financial lesson. Whatever you decide, good luck to you! We wish you financial success.
Debt Cures – Eliminate Credit Card Debt
