Comments on: Reader Question: 401(k) Loan to Pay Off Credit Card? http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/ Money issues for college students and 20-somethings, without being boring. Wed, 08 Feb 2012 11:22:41 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Will http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-171224 Will Tue, 16 Aug 2011 13:40:59 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-171224 I took a loan out of my 401k about a year ago to pay off some credit card debt and it was the greatest thing I could have done. I wiped out two high balance cards each with a 22% interest rate. I saved hundreds, probably thousands of dollars I would have paid in interest on those cards. My 401k loan payment is deducted from my paycheck semimonthly and the rate is only about 7%....If you are secure in your job and have high interest rate cards with high balances and live somewhat paycheck to paycheck, then this is a no brainer.... I took a loan out of my 401k about a year ago to pay off some credit card debt and it was the greatest thing I could have done. I wiped out two high balance cards each with a 22% interest rate. I saved hundreds, probably thousands of dollars I would have paid in interest on those cards. My 401k loan payment is deducted from my paycheck semimonthly and the rate is only about 7%….If you are secure in your job and have high interest rate cards with high balances and live somewhat paycheck to paycheck, then this is a no brainer….

]]> By: Hai Schebler http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-163084 Hai Schebler Wed, 29 Jun 2011 18:13:35 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-163084 One thing I'd really like to say is that car insurance termination is a dreaded experience and if you're doing the best things like a driver you simply will not get one. A lot of people do obtain the notice that they've been officially dumped by their particular insurance company they have to struggle to get more insurance after a cancellation. Low-cost auto insurance rates are often hard to get from a cancellation. Having the main reasons with regard to auto insurance canceling can help people prevent sacrificing one of the most important privileges out there. Thanks for the suggestions shared via your blog. One thing I’d really like to say is that car insurance termination is a dreaded experience and if you’re doing the best things like a driver you simply will not get one. A lot of people do obtain the notice that they’ve been officially dumped by their particular insurance company they have to struggle to get more insurance after a cancellation. Low-cost auto insurance rates are often hard to get from a cancellation. Having the main reasons with regard to auto insurance canceling can help people prevent sacrificing one of the most important privileges out there. Thanks for the suggestions shared via your blog.

]]> By: Shawn Harstad http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-95384 Shawn Harstad Wed, 30 Jun 2010 17:34:48 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-95384 Just found this googling. A lot of good info here. I have a whole lot of credit card debt and am thinking about using the 401k loan to pay most of it off. Can someone tell me how it gets paid back? Do your current pre tax contributions continue? Does your employer matching contributions continue with it? Can you back the loan monthly and make lump sum payments to pay it down? Thanks this is very helpful. Just found this googling. A lot of good info here. I have a whole lot of credit card debt and am thinking about using the 401k loan to pay most of it off. Can someone tell me how it gets paid back? Do your current pre tax contributions continue? Does your employer matching contributions continue with it? Can you back the loan monthly and make lump sum payments to pay it down? Thanks this is very helpful.

]]> By: Dave http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-95092 Dave Sat, 26 Jun 2010 00:11:09 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-95092 Question: We are in late 40s. We had a business loss about 5 yrs ago that cost us nearly 100k. I have 40k in 401k, but am thinking about taking loan out to pay off our our debts we have, so we can refi house. I have dramatically decreased contribution in 401k, as we have been investing successfully elsewhere, even in this horrible economy. If I didnt have 401k, with other investments, with returns receiving now(in bad economy), if economy remains horrible, I can still retire VERY comfortbaly at 62. What drawbacks am I missing? as I am not going to leave my job, been there 24 yrs now (continued working while having business). Question: We are in late 40s. We had a business loss about 5 yrs ago that cost us nearly 100k. I have 40k in 401k, but am thinking about taking loan out to pay off our our debts we have, so we can refi house. I have dramatically decreased contribution in 401k, as we have been investing successfully elsewhere, even in this horrible economy. If I didnt have 401k, with other investments, with returns receiving now(in bad economy), if economy remains horrible, I can still retire VERY comfortbaly at 62. What drawbacks am I missing? as I am not going to leave my job, been there 24 yrs now (continued working while having business).

]]> By: John http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-94092 John Wed, 09 Jun 2010 16:30:55 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-94092 My wife and I are 50 years old. We have roughly 200k in our 401k and have credit card debt of 15k. While we don't have problems making the monthly payments (minimum + $200 or $300) it irritates me to see how much in interest we are throwing away while my 401k sits there earning zero in todays market. We could pay off the loan in 3 years. I am interested in hearing comments about this strategy. (yes we have stopped using credit cards) My wife and I are 50 years old. We have roughly 200k in our 401k and have credit card debt of 15k. While we don’t have problems making the monthly payments (minimum + $200 or $300) it irritates me to see how much in interest we are throwing away while my 401k sits there earning zero in todays market. We could pay off the loan in 3 years. I am interested in hearing comments about this strategy. (yes we have stopped using credit cards)

]]> By: Michelle @ Merchant Advance http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-91273 Michelle @ Merchant Advance Tue, 04 May 2010 01:03:07 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-91273 I have to agree, getting the 401K is definitely risky. I also do agree with cutting up the cards until you have paid off all your debts, If you have trouble paying your debts in the first place, even resorting to borrowing money to pay off your debts-then it would be a good idea to actually stay away from them and learn to spend within your means. Otherwise, everything will just pile up and bury you someday. I have to agree, getting the 401K is definitely risky. I also do agree with cutting up the cards until you have paid off all your debts, If you have trouble paying your debts in the first place, even resorting to borrowing money to pay off your debts-then it would be a good idea to actually stay away from them and learn to spend within your means. Otherwise, everything will just pile up and bury you someday.

]]> By: Mark http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-87034 Mark Wed, 03 Mar 2010 01:09:20 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-87034 Hi Stephanie, Thanks for the quick reply, but, with all due respect, that still does not answer my question. I am not a big financial guru or anything, so I guess it would be a good idea to get feedback from people that might know more about this topic that I do. Of course cutting your CCs will solve that part of the problem, but that is not my concern right now (I don't have crazy spending habits, just a couple of months with unexpected changes). I just want to if, based on this scenario, it would be advisable to go ahead and borrow money from the 401k in the shape of a loan (not a withdrawal). Thank you very much! -Mark Hi Stephanie,

Thanks for the quick reply, but, with all due respect, that still does not answer my question. I am not a big financial guru or anything, so I guess it would be a good idea to get feedback from people that might know more about this topic that I do. Of course cutting your CCs will solve that part of the problem, but that is not my concern right now (I don’t have crazy spending habits, just a couple of months with unexpected changes). I just want to if, based on this scenario, it would be advisable to go ahead and borrow money from the 401k in the shape of a loan (not a withdrawal).

Thank you very much!

-Mark

]]> By: Stephanie http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86998 Stephanie Tue, 02 Mar 2010 13:17:32 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86998 Hey Mark, give the article a quick read again. The long and short of it is, the only works if you <em>cut up your credit cards</em> after you pay them off using the 401(k) loan and <strong>don't get into more credit card debt</strong>. Otherwise, you'll have BOTH high interest credit card debt and a shiny new 401(k) loan, and you'll have just made two big steps back. Hey Mark, give the article a quick read again. The long and short of it is, the only works if you cut up your credit cards after you pay them off using the 401(k) loan and don’t get into more credit card debt. Otherwise, you’ll have BOTH high interest credit card debt and a shiny new 401(k) loan, and you’ll have just made two big steps back.

]]> By: Mark http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86966 Mark Tue, 02 Mar 2010 05:30:09 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86966 So I'm 26yo and I have a $4,200 debt on my 16%interest CC because of moving expenses. I've been on my job for 2 years and have collected around $14k on my 401(k) for which I am fully vested. However, I can only borrow around $6,500. Based on what you guys comment here, wouldn't it make sense if I borrow the $4,200 @ my 401(k)'s 3.5% interest? I ran some numbers and I can pay it it 3 years paying a little over $112/mo. Isn't this a good deal? I still have 30+ years to recover the "loss" on compounded interest from my 401(k) and I will still contribute 10% to my 401(k) as I have been doing for the past 2 years (my company matches my contributions as well). PLEASE ADVISE, I want to get rid of this stupid CC debt!! So I’m 26yo and I have a $4,200 debt on my 16%interest CC because of moving expenses. I’ve been on my job for 2 years and have collected around $14k on my 401(k) for which I am fully vested. However, I can only borrow around $6,500. Based on what you guys comment here, wouldn’t it make sense if I borrow the $4,200 @ my 401(k)’s 3.5% interest? I ran some numbers and I can pay it it 3 years paying a little over $112/mo. Isn’t this a good deal? I still have 30+ years to recover the “loss” on compounded interest from my 401(k) and I will still contribute 10% to my 401(k) as I have been doing for the past 2 years (my company matches my contributions as well). PLEASE ADVISE, I want to get rid of this stupid CC debt!!

]]> By: pete http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86427 pete Sun, 21 Feb 2010 19:10:12 +0000 http://poorerthanyou.com/2007/03/20/reader-question-401k-loan-to-pay-off-credit-card/#comment-86427 all this "don't touch your 401k" talk is simply scare mongering by the neoliberal powers that be. The "Experts" tell you to save and save and invest and invest, meanwhile interest rates creep down and markets collapse, and the dollar loses value. If you are middle class, don't worry about silly tax implications, it's paralysis by analysis. All the silly tax implications for a $10K will mean about $100 in real money. This is nothing that should keep you from using a tool that could turn your finances around. Do what makes sense to you. all this “don’t touch your 401k” talk is simply scare mongering by the neoliberal powers that be. The “Experts” tell you to save and save and invest and invest, meanwhile interest rates creep down and markets collapse, and the dollar loses value. If you are middle class, don’t worry about silly tax implications, it’s paralysis by analysis. All the silly tax implications for a $10K will mean about $100 in real money. This is nothing that should keep you from using a tool that could turn your finances around. Do what makes sense to you.

]]>