I was thinking a few months ago that maybe I should kill a home equity loan I took out at a 4.5 percent interest rate that had spiked up to 8.75 percent by borrowing against my 401k at a 4.25 interest rate — even with the tax deduction with the home equity loan, I think I would have come out ahead with the borrowing.
You know the risks of borrowing from your retirement account, but the higher interest rates attached to personal loans makes you wary. If you’re curious whether a 401(k) loan or a personal loan would be better for your financial situation, take a closer look at the differences to be sure you can make an informed decision based off the facts.
Home Equity Loan vs. 401(k) Loan. While you can dip into your 401(k), you pay a big price to do so. As for home equity loans.. before you borrow against your home, review your budget to make sure that you will be able to make your payments without any problem.
401k Loan: 401k loans may be easier to attain than other traditional loans. You are borrowing from yourself; therefore they do not require a loan application or credit check. 401k loan provisions generally allow you to borrow up to 50% of the account balance or $50,000 at a maximum. 401k loans usually have a maximum repayment period of 5 years.
For a relatively small loan (under $10,000), what are the pros and cons of a home equity loan vs. a retirement plan (403b) loan? hel would be a fixed rate of 3.49% for 5 years, but would require an appraisal and have other closing costs.
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The fact that you pay the interest back to yourself is especially unique and makes 401(k) loans attractive in certain situations. So while you should proceed with extreme caution when considering a 401(k) loan, and while in most cases there are better options available to you, here are three situations in which a 401(k) loan can be a good idea. 1.
While 401(k) loans are often demonized, when done sensibly taking one need not spell trouble for your retirement savings.. Home-Equity Loan. A home-equity loan is a consumer loan secured by a.