How Do You Borrow Money From A 401K?
As your career progresses, you may need to take money from your 401k to cover unavoidable expenses. Your need to purchase a house, pay for advanced education or keep expensive medical bills at bay can be met with responsible borrowing. The limitations of 401k lending for the average consumer means you need to observe federal laws to avoid excessive penalties. Take out a loan of up to half your total principal in order to pay off important financial obligations. The federal government caps the cumulative amount of loans in a given year to $50,000 per account holder. Establish a budget that helps you pay back the money you borrow from your 401k account. The standard repayment period for a 401k loan is 5 years, though certain levels of hardship allow for a longer repayment period. Read through your 401k plan’s fine print to determine whether there is a minimum loan level for each transaction. Some 401k providers require a minimum amount borrowed by a user as a way to determine the level o
