How Do You Take A Loan Against A 401K?
If you need a loan, it might appear that your 401k is the best option because you’d be borrowing your own money. But it’s not that easy. Here are some of the pros and cons that you should consider before you borrow against your 401k. As with most financial issues, not everything is obvious. Make sure that you can borrow from your 401k plan. You may be able to borrow as much as 50 percent of your vested account up to a maximum of $50,000. Most plans require you to repay the loan within 5 years. It could be longer if you are borrowing for your first home. Check the ground rules before you make a decision. Consider the favorable aspects of making a loan against your 401k plan. First, you will pay a reasonably low rate of interest that has been set by your plan, often only a point or two over the prime rate. You will also pay no tax on that interest until you begin withdrawing from the plan when you become 59½. Furthermore, there is no credit check, since essentially you are borrowing your
