STYLETHREAD -- LET'S TALK SHOP!

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Originally posted by: lsubatgirl
"Every textbook and class I've taken has said not to do this.  Reason is that when you take that money out of your 401k it will not grow and you will not only lose out on the principal but the interest also and you will never be able to make it back up.  I would just cut down on my spending first to see if you can get control over your cc debt before borrowing from your 401k plan."

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But if I am paying it right back every time they take a payment out of my check, how would I not make it up?  The good thing is I am young and have about 40 more years to work and pay into it.  I don't really see why it's bad.  Also, I don't plan on borrowing a ton, so as soon as I had money - I would pay the whole thing off...

Has anyone ever done this?  Borrowed from your 401k?

I haven't done it, but you should check to make sure you can take the money out to pay down your CC debt. Some plans specify that you can only borrow for a home purchase or medical expenses, etc.

Also, make sure you're not planning to leave your job anytime soon, because I think if you do you have to pay all the money back immediately. There are a lot of rules and restrictions, so I'd check with your HR rep. before considering it too seriously.

Idea: What about just taking out a small bank loan to pay it off and not touch your 401K plan? Could you do that? I know you said you work for a bank so you  might want to check into that and see if its a possibility plus you might get a low rate since you are an employee.

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Originally posted by: gruiz
"I haven't done it, but you should check to make sure you can take the money out to pay down your CC debt. Some plans specify that you can only borrow for a home purchase or medical expenses, etc. Also, make sure you're not planning to leave your job anytime soon, because I think if you do you have to pay all the money back immediately. There are a lot of rules and restrictions, so I'd check with your HR rep. before considering it too seriously."

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Yes, I already checked and I could take out a general loan, which means, I can use it for whatever I want.  It doesn't have to be specified. 

something else that hasn't been mentioned (besides the fact that you lose out on the potential interest you could earn on that money, which is a pretty big deal) is that money that you contribute to your 401(k) is not taxed (until retirement, anyway), but anything you do withdraw from it is taxed upon withdrawal.  and the deferred tax is a great benefit of the 401(k) format.  just something else to consider.

i wouldn't recommend it though, either.  only as a last resort and even then...i'd still look for other options.  i like to think of my retirement money as completely off limits.

hmm I would assume all banks offered small loans.  Call up a loan officer at bank one.  Maybe a smaller regional bank in your area would do it.  how about Regions, hancock, hibernia/capital one, bank of america??

https://loans.regions.com/PersonalLoanInfo.html Regions bank which has locations in Illinios offers personal loans.

-- Edited by lsubatgirl at 17:20, 2005-04-25

Call a loan officer & tell them you want to do a debt consolidation loan - it is really just considered an unsecured loan & your rate on it could be as much as 20%, even at a reputable bank. As a previous bank officer, sometimes it's really hard to get these done if you have a lot of debt because if you have a history of charging, most people, even with good credit, pay off their credit cards when they consolidate then recharge. It depends on the bank policy & they will look closely at your debt to income ratio to see if you could afford a loan payment + credit cards payments too. The bad thing that the officers know is that if you pay off all those cards, the companies will usually up your limit which could potentially put you in a worse position that you started in. Just letting you know in case they turn you down the thinking behind it. And although I know you would NEVER charge them back up, everyone says that, even the people that end up do just that.

Also on the borrowing from 401K plan, here is another perspective from someone like me who did it stupidly & knows - I borrowed because of my higher debt to income ratio I couldn't do any more unsecure loans in a bank environment, then when I was laid off, i had to come up with the money (think, then no income) or take the hit & pay the taxes & penalties on that money just as if I had taken it straight out. Trust me, if you don't qualify for an unsecured loan in your current situation, that doesn't improve with no employment. And I had no intention of leaving my job anytime soon so thought it would be a great idea, but then ended up in my scenario - not pretty.

Not trying to preach at you, just trying to let you learn from the stupid mistakes the rest of us have made!!!!

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Originally posted by: Farrah
"NO, NO, NO, NO, NO!! Sweetie please do not do this!!  PM me your fax number and I will fax over the entire chapter of Suze Orman's book on why this is the worst option possible.  There is way to much to get into, but DO NOT DO IT!!  I'm serious, I am going to copy that chapter for you right now."

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Ok, I just PM'd you w/my fax #, but can you not fax until tomorrow morning when I'm back at work?

So, what does Suze Orman's book say I should do?

please please please  DO NOT do this!!!!  my sister told me an awful story about one of her clients this year that she prepares taxes for every year.  In 2004 they decided to borrow from their 401K to pay off their house.  (granted this is a lot more $$$ than you are talking but bear with me)... This year my sister had to call to tell them that they would be PAYING $16,000 in TAXES because of the repercussions of borrowing against your 401K... you will have to penalties on top of percentage back, etc.  it is just not worth it.

please continue to pay your CCs as you have.  DO NOT touch your 401K!!!!!!!!