Income 70K
Debt $300,000 mortage 4.5% fixed
Debt $4,000 Student loan 4.5%
Debt $5,000 Student loan 6.5%
Debt $5,000 Student loan 6.0%
Debt $5,000 Credit Card 10.2%
401K $11,000
Should I take out a loan of $5,000 from 401K @ 4.25% to pay off credit card, stop paying in to 401k and focus on paying off student loan? I still have 2 years left in school, therefore loans will increase.
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I’ve often considered the same option; either borrowing against it or cashing it in. If I cashed it in, it would just about pay off all credit card debt. It it wise to flushing years of retirement savings? I would have to start completely over and at 54 would probably never be able to retire. The debt is coming down but ever so slowly and the 401k is only making a few bucks each quarter. Are there legitimate companies who will do ‘signature’ loans with people who have a good payment history? Is a debt settlement company a viable option? Â
Since the last post on this was 4/9/12, I’m assuming you made your decision. Would share your thoughts, regrets, and positive findings? I am tired of this debt and willing to work part time or whatever it takes to get rid of it.
This is in no way a solicitation but I just wrote an article about this that may help you.Â
http://www.avoidbk.com/borrowing-from-401k/ I'd also recommend that you read Steve’s post about the subject as well. https://getoutofdebt.org/45163/heres-why-a-401k-loan-to-pay-off-debt-can-cost-you-a-massive-amount-in-retirementÂ
You have to weigh the pros versus the cons here. It’s sometimes ridiculous to make debt to pay off debt. Could you maybe just stop paying into the 401K for a few months and get a better handle on your debt, or maybe use the money you’re not paying to 401K to pay for current schooling? Good luck.
Have you done the math to see what the benifits will be monthly payment wise? Also factor in early withdrawl penalties/taxes associated with pulling from your 401K. Are you able to make your monthly pamyents on these debts right now? Are you using all of your spendable income on keeping bills current and using the credit cards every month as a way to make ends meet, meaning your credit card debt is climbing every month?