I am a bot, and this action was performed automatically. The other is around 2500 and under 10 apr. I am a bot, and this action was performed automatically. I've done it and not had issues paying it back (and also increased my contribution out of guilt). Reasons why advise against taking a loan … The numbers … Usually there's a one time 4% transfer fee. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. I make 90k a year and virtually have no money saved otherwise (around $4000). While I currently have no plans to leave my current position, I definitely don't want the loan to be a reason for me to stay if an opportunity presents itself in the next year to 18 months. You can only withdraw elective-deferral contributions from your 401 (k) in most cases. Car loan, mortgage, medical expenses, etc... or are the credit cards it? I pay $1500 a month in rent. But nothing is worse (ok, there are a few things, but you get my point) than paying credit card … I used a 401k loan to pay off college loans but had to be very frugal because I chose an aggressive repayment term. As mentioned above, the loan becomes due, or you'll owe interest. The high risks of using a 401(k) loan to pay off other debt. There are two issues with tapping your retirement fund to pay off debt. Cookies help us deliver our Services. You could apply for one or two of those, do the balance transfer to take care of the current cards, and work on paying off the new cards over the 12-18 months. Without knowing those two things, I can't really give you specific advice. 1 is about $7500 with a high interest of 20+ apr. I would advise against take a loan from your 401k. However, I'm not clear on one thing. --Your loan will not be reported to credit bureaus, so there’s no effect on your credit score. That means if you lose your job or change employers, you migh… 2 the gains of not paying high-teens credit card interest is likely much better than the lost market returns, 3 agree, but still may make sense when considering the insane credit card interest. I'm 31 years old with about 60k in my 401k. You say, "your family" does that include other adults with credit in their names that is not your obligation? New comments cannot be posted and votes cannot be cast, More posts from the personalfinance community. This heads off missed payment fees and protects your credit score. Julian has $20,000 credit card debt and he’s paying an average 18% interest rate on that debt. Press J to jump to the feed. Another option available is to cut back on contributing to your retirement plan in order to free up a little money to aggressively pay off high-interest rate credit card debt. Methods to Pay Off Your 401k Loan Faster Make Bi-Weekly Payments. Also, I believe a 401K loan is better for your credit as it does not show on your credit report as a loan or outstanding credit due. Also, I believe a 401K loan is better for your credit as it does not show on your credit report as a loan or outstanding credit due. I would pay the minimum on the cc with the 2500 balance and throw all your extra money at the 7500 cc until it is paid off. We got out of debt, and I paid myself back. Do you have any other substantial debt? But I would advise against it if you think you might want to leave or if there's any danger of losing your job or during the term of the loan. You will miss out if your employer does a match. I can manage taking out a 401k loan to pay off both cards in 12 months if I drop my contribution down to 5%. By taking … This sounds too good to be true, right? And aggressively pay them down and to a zero balance. Steve Rhode, The Get Out of Debt Guy: Is it a bad idea to use a 401k or IRA hardship withdrawal to pay off credit card debt? A big factor will be how secure you feel in your job. Join our community, read the PF Wiki, and get on top of your finances! Cut your spending and possibly your 401k contributions to get more cashflow to get rid of that debt as quickly as possible. Biweekly is the typical pay schedule. That way you’re paying 0% interest on the amount, instead of your current rates. I say you have any questions or concerns of 20+ apr on another % interest on amount. My belt and pay off both of these cards with balances of $ 7,600 and $ 2500 on.... So there ’ s only putting the minimum amount in their 401k, ” said. 401K loan to pay off debt above, the get out of debt and!, credit, investing, and get on top of your finances a loan from your CONTRIBUTIONS! Had issues paying it back ( and also increased my contribution out of debt Guy a year my out! 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