We have $20k in credit card debt. Should we take a loan from our 401k to pay them off. My wife and I are in our early 30s and have time to smooth things over...hopefully.
2007-09-22 00:32:29 · 13 answers · asked by gratefulchef2000 1 in Business & Finance ➔ Personal Finance
Yes!
Ask youself would you borrow money on a credit card to invest....NO
2007-09-22 06:28:33 · answer #1 · answered by Anonymous · 0⤊ 1⤋
I borrow money from my 401k all the time. I think it’s a good idea to pay off the credit cards using 401k account then never use the credit card again; the best card is the debit card. The money you borrow from your own 401k account the principal and interest on the loan goes directly to your account and you have 1 to 5 years to pay off that to come directly out of your pay check so you don’t have to worry about the payment. On the other hand with credit you will be paying principal plus interest to the credit card company.
2007-09-22 07:55:30 · answer #2 · answered by badashah4ever 1 · 0⤊ 2⤋
I would suggest an alternative source of funds. If you and your wife own a home, you may have enough equity in that home to help pay off the debt. Visit your bank, and have them show you the numbers.
Home Equity Lines/Loans tend to have the lowest rates compared to personal loans. Also, breaking into your 401k may incur penalties as well. The interest you pay on a home equity loan/line can be up to 100% tax-deductible (see your accountant). They also have long terms for repayment so you're not rushing to pay it off.
2007-09-22 12:52:21 · answer #3 · answered by dpkmissy 3 · 0⤊ 1⤋
No, don't make one of the worst financial mistakes that you can by liquidating your 401k or taking a loan out of it to pay off your credit card debt.
You need to make a budget and stop using the credit cards.
2007-09-22 08:50:45 · answer #4 · answered by Anonymous · 0⤊ 2⤋
By taking money out of your 401k you will be facing a 10% with the IRS plus the money that you take will be fully taxable. Remember, money that goes into a 401k plan is not taxed. Look at other options first. Quit using your credit card, reduce spending, cut out or reduce your expenses.
2007-09-22 08:25:56 · answer #5 · answered by Gary 5 · 0⤊ 2⤋
Yes. Pay off your credit cards. Cut up and cancel all but one. You may need one for emergencies.
When you borrow from your 401k, you pay it back with interest, but all of the money stays in your account.
If you have doubt about your ability to refrain from spending, talk to a credit counselor.
2007-09-22 07:43:17 · answer #6 · answered by regerugged 7 · 0⤊ 2⤋
I did. The advantage is you are paying lower interrest rates and the interrest goes back into your account. Before you do this though work with the credit card companies to buy down your debt. They will work with you and you shold be able to cut the debt by at least 30%.
After you do this do what I did and destroy your cards it is too easy to use them again.
2007-09-22 07:47:44 · answer #7 · answered by Steve Y 1 · 0⤊ 2⤋
NO! Credit card companies offer very low interest if you call them, most of the time they will work something out for you....just tell them that you are in over your head........also you could file bankruptcy if you want to, but it messe up your credit for 7 years......best of luck to you guys,and maybe you should go ahead and cut up those cards.
2007-09-22 07:45:11 · answer #8 · answered by Anonymous · 0⤊ 2⤋
Yes. Destroy ALL your credit cards and live within your means from now on. Then you won't have to worry about debt and you won't have to pay off exhorbitant interest. Difficult to do at first, but easy peasy as time goes on.
2007-09-22 07:55:58 · answer #9 · answered by chris n 7 · 0⤊ 2⤋
that's a lot of debt. you've run up that much already. are you sure you're responsible enough to not run up that much again? taking a loan out of your 401k is not advisable but if you can be disciplined enough it might be a smart move.
2007-09-22 07:43:45 · answer #10 · answered by Anonymous · 0⤊ 2⤋