Current Events > Loan advice

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@Darkman124

I have to take out a loan. My job offers a 401k loan, where you can borrow against your 401k without the penalty fees, then you pay yourself back with interest. It works through payroll deduction. Looks like the interest rate would be about 6%.

Would that be the best option, or just a traditional loan? This is for a home improvement.
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i recommend using a HELOC instead. lower interest rate.

but i am not clear on the stipulations of this:

* do you keep your 401k investments intact? or do they decrease, causing you to suffer opportunity cost of not being long stocks

* do you keep the interest? or does your employer/401k manager get it?

my assumptions are that your investments dip and you don't get the interest, so it's a 6% loan that also cuts your market exposure which is bad on two fronts and mostly for people with less than optimal credit

if you have maximized credit scores you can get a HELOC for ~3-4%
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We get the interest back, but I'll look into HELOC. Dunno about the investments part.
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If you have the means to pay back a 401k loan you should go that route. The interest goes right back in to your investments.
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bluezero posted...

We get the interest back, but I'll look into HELOC. Dunno about the investments part.

ok, if you get the interest back that's different

the only opportunity cost then is missing stock performance, which is an acceptable risk
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If you have an IRA, and you can repay the amount within 60 days, you can withdraw money from that interest and tax free.
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Always borrow money with a second person so you aren't doing it a loan
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Yaridovich posted...

Always borrow money with a second person so you aren't doing it a loan

Can I borrow $10,000? Thanks sweetheart.
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