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Have you ever borrowed against your 401(k)??

Posted by on May. 27, 2014 at 4:14 PM
  • 9 Replies

I've decided to borrow again my 401(k).  To make the long story short, my husband had three knee surgeries withing the past two years and.....since worker's comp doesn't pay alot, we got set back a little.  The motor went out in one of our vehicles.  So, I did it to get the motor fixed, pay off some small debt (just in case husband needs to have another surgery, we'd be able to live off my pay checks).  Did  your borrowing benefit your financial situation?  So you regret doing it?  Pros and Cons, please.

by on May. 27, 2014 at 4:14 PM
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Replies (1-9):
baconbits
by Bronze Member on May. 28, 2014 at 11:04 AM
1 mom liked this

 I borrowed against mine but they automatically take the payment out of my paycheck every 2 weeks. I had to have carpal tunnel done and insurance didn't pay for all of it plus there were some other things happening that threw us way behind. For me it was worth it. My job is really stable which is hard to say in this world today. I'm not worried about losing my job or the doors closing.

What I did was have x amount taken out of my paycheck every WEEK instead of every 2 weeks so that I cut my payback time in half. What's also nice is that any interest you are paying you are paying to yourself instead of to a bank.

The downside of this would be if you lost your job due to whatever reason. At that time they can demand the total amount paid back. If not then you could owe a hefty penalty come tax time.

If you decide to go for the loan pay it back as quickly as you can. If it says pay $50 every 2 weeks try to make it $50 every week if possible. It's amazing but after the first couple of payments you don't even miss it out of your paycheck.

ivf_blessed
by Bronze Member on May. 30, 2014 at 4:00 PM

The obvious con is that if you lose your job for whatever reason, you would be required to pay back the entire loan balance (usually within 4-6 weeks) or it would be considered a distribution on which you would owe taxes and a penalty.

If you can, try to pay back as much as you can as fast as you can.

 

BShip2010
by New Member on May. 30, 2014 at 4:47 PM
My boyfriend did this because we were very broke and couldn't pay the bills. I'm not sure about the cons but I know the pro was that we didn't have to go without anything.
jwhit8791
by Member on Jun. 2, 2014 at 3:01 PM

We are contemplating using up to half of DH's and we are planning on paying it back as quickly as possible.  It will take precedent over all other debt.

teatyme007
by Member on Jun. 4, 2014 at 10:38 AM

I did request a borrow and received the check within a week.  We paid off all our dept (except the house and one of cars), and we're getting the motor rebuilt in the SUV.  I can't contribute for 6-months, but that's ok!  It will be nice having two running vehicles, and no dept.  Plus, it will be paid back in a few years with interest going right back into my 401.  I made it a few years so I could afford to pay back more per pay period if able.  Thanks for your thoughts. 

MoMofTWOkiddos
by Member on Jun. 4, 2014 at 11:21 AM
I've tried borrowing against my 401k but Wal-Marts policy is very strict so unless you follow under their 4 reasons to borrow, you are SOL. They refused my request to pay off some bills.
michiganmom116
by Gold Member on Jun. 5, 2014 at 7:16 AM

No.

rosesink
by Member on Jun. 6, 2014 at 11:01 PM

You should not borrow from your 401K.  You loose a LOT of money in the compound interest and you pay interest on the loan.  In addition to all of this you will be subject to double taxation on your money.  Let me explain, you put this money in to your 401K as tax defered and as soon as you withdraw it you will be taxed on it, then when you pay it back you will be paying the loan with money that is "after tax".  You would be best off to try to tighten your belts and live off what you make, if at all possible.

RutterMama
by Member on Jun. 12, 2014 at 4:49 PM

I don't have any experience with it. Good luck tho!! 

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