ST Alpha - "STIS -- What do we think of the idea of taking a loan from an 401(k) in order to pay down credit card debt?" (Reading a Post)

SlickerTalk
Search Archives
The Leaderboard
The FAQ

Down to Post

Backboards:

Posts: 166

STIS -- What do we think of the idea of taking a loan from an 401(k) in order to pay down credit card debt?

Posted by znufrii Jun 15 '09, 07:33

to repay (with interest to myself) over not more than 12 months.

Responses:

No. If you lose your job (in today's economy, that more of a possibility) you have to pay the loan back in full immediately, or get hit with taxes - ty97 Jun 15, 07:46 2
- Although, assuming the CC debt he paid off would leave him with room on the cards... - TFox Jun 15, 07:50 1
  - I don't think you can pay back a 401K using a credit card, but I could be wrong on that. -- nm - ty97 Jun 15, 07:52
if you feel comfortable with your job security, and understand the taxation issue, there is absolutely nothing wrong with doing this - decline Jun 15, 07:44 5
- that's good to know. thanks. - znufrii Jun 15, 07:46 4
  - also, I'm curious how they would handle a Roth conversion if there is a loan balance outstanding - znufrii Jun 15, 07:52 3
    - the loan would not transfer over and would be treated as a distribution -- nm - decline Jun 15, 07:54 1
      - makes sense. thanks. -- nm - znufrii Jun 15, 07:54
    - I doubt you could do a conversion on funds that have been borrowed against. - TFox Jun 15, 07:53
[deleted] 5
- since I'm borrowing the money from myself, I can't imagine the interest that is charged would be going to anyone else. -- nm - znufrii Jun 15, 07:40 4
  - [deleted] 2
    - 4.25% -- nm - znufrii Jun 15, 07:45
    - normally the rates are right around prime (sometimes prime+1) -- nm - decline Jun 15, 07:44
  - the interest is paid to you -- nm - decline Jun 15, 07:41
that's very generous of you. thanks! -- nm - dug Jun 15, 07:34
never a good idea, since the penalty is so high.. -- nm - colin Jun 15, 07:34 9
- there are no penalties -- nm - decline Jun 15, 07:40
- there's no penalty for a loan, just a $50 application fee. -- nm - znufrii Jun 15, 07:34 4
  - eh, still.. not a fan of touching that money.. -- nm - colin Jun 15, 07:52 2
    - it's far from an ideal situation, but then again, so is my credit card situation. - znufrii Jun 15, 07:53 1
      - shoot me an email.. we're probably in the same boat right now.. -- nm - colin Jun 15, 07:58
  - at least, if there is I'm not seeing it in the fine print. -- nm - znufrii Jun 15, 07:35
- plus if he loses his job, he owes the loan back. -- nm - loosilu Jun 15, 07:34 2
  - no. if he loses the job, the loan becomes income and he pays taxes on it as if he took a distribution -- nm - decline Jun 15, 07:41 1
    - either way, it's in the "not good" category... - znufrii Jun 15, 07:42
very very bad idea. -- nm - loosilu Jun 15, 07:34

Post a message top

STIS -- What do we think of the idea of taking a loan from an 401(k) in order to pay down credit card debt?

Replies are disabled on threads older than 7 days.