Loan from 401K

computer111 · #1 (**permalink**) 02-20-2010, 06:44 PM

I am 30 years old and have approx $50K in my 401K. I have $25K in debt that i would like to pay off. The debts are on my credit cards, one of them has 10K with a 10% interest rate, the other is $15K with a 12% interest rate.

I was wondering if its wise to borrow $25K from my 401K for 2 years and have it autodebit from my checking account every two weeks. Thats how the plan works. Its also a 3.25%, i am not sure if thats fixed or variable. I figure i will save a lot if i pay off my debt since it will help my credit. the plan admin says the 401k loan will not show up on my credit as a debt.

Any suggestions?

Thank You

sapphirecapital · #2 (**permalink**) 02-20-2010, 09:39 PM

there are tax consequences you may not like, you are young enough to fill it up again but ask your 401k institution about the consequences, they can tell you in detail and it is free and then calculate it

computer111 · #3 (**permalink**) 02-20-2010, 10:11 PM

tax consequences? I thought if it was a loan, then there are no tax consequences unless i default. I just want to pay off my credit card debts and clear it off my credit report. I contribute 6 percent to my current plan and i will continue to do so.

I guess i am tired of paying over $200 in interest every month when i can pay more towards principle wtih the 401k loan.

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