Should You Borrow From Your 401k?
Pros:
l Doesn’t affect your credit rating l Low interest l You pay yourself the interest l You won’t be charged the 10 percent early withdrawal penalties plus income taxes l You don’t have to qualify for the loan l No collateral needed
Cons:
l You forfeit accrued interest l The interest is not tax deductible l 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 l If you default on the loan, it is considered a withdrawal and you will owe a 10 percent penalty plus a hefty tax payment