The economy all over the world right now is a tight one. People are always looking for different ways to get extra cash and often times they need the extra cash quickly. This is where borrowing from your 401K plans might come in handy. Some will say that it is a good idea while others will tell you to avoid it because it might be a dangerous financial move. In this article you will find out why it could be both a good and a bad financial situation.
If you select to borrow from your 401k you will find that the interest rate you will be given is a very low interest rate. Not to mention that when you are paying the interest it goes directly back into your 401k-retirement account. For this reason you might think that this is one of the better installment loan options you may have. Of course it will all depend on your financial situation as well.
The repayment plan of borrowing from your 401k-retirement account is where things start to get tricky. The general rule is that you will be required to pay back the loan in full within a five year time period. If you do not the loan will be treated like you cashed out and then you will have additional penalties that you will be required to pay. The other requirement is that if you leave your job for any reason and you are making payments the balance of what is remaining on the loan will be treated as if you cashed out of your 401k. [Continue reading]