Should You Borrow From Your 401k?

Blog Post Image

Should You Borrow From Your 401k? 

Here are some of the point you should think about before you decide to use your 401k 


Doesn’t affect your credit rating

Low interest l You pay yourself the interest

You won’t be charged the 10 percent early withdrawal penalties plus income taxes

You don’t have to qualify for the loan l No collateral needed


You forfeit accrued interest

The interest is not tax deductible

Some plans allow no contributions to the 401(k) during the loan l If you lose or quit your job, the loan is often due in full in 30-60 days

If you default on the loan, it is considered a withdrawal and you will owe a 10 percent penalty plus a hefty tax payment

As always, contact your tax adviser or certified public accountant to make sure the tax implications.