401K loan to pay credit card debt

[Anonymous]

Anonymous wrote:

Anonymous wrote:You said you had a job loss. If you're not currently employed, you won't be able to borrow from your 401k.

I am employed now. The job loss was was a few years ago. I was unemployed for a period of time and then took a lower paying job.

new employer won't let you borrow contributions you made in your last job, probably. check your rules.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You said you had a job loss. If you're not currently employed, you won't be able to borrow from your 401k.

I am employed now. The job loss was was a few years ago. I was unemployed for a period of time and then took a lower paying job.

new employer won't let you borrow contributions you made in your last job, probably. check your rules.

OP said she talked with OP. Read.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You said you had a job loss. If you're not currently employed, you won't be able to borrow from your 401k.

I am employed now. The job loss was was a few years ago. I was unemployed for a period of time and then took a lower paying job.

new employer won't let you borrow contributions you made in your last job, probably. check your rules.

OP said she talked with OP. Read.

She had a talk with herself? I'm reading but not understanding. What do you mean?

[Anonymous]

Anonymous wrote:Sounds like it might be a reasonable idea if, and only if, you cut up the cards.

And if, and only if, you make the same $1000 payments to pay off the 401k debt. NOT the $450 minimum payment.

[Anonymous]

Anonymous wrote:Yeah, we have thought about this for a down payment. My 401k enables me to pay interest on that loan back to myself. Win, win. I think it matters how old you are, but then again you still have the debt. But if you're 30 I think it's a no brainer.

It's not win/win - in all but the most dire circumstances, it's a bad move. First, the amount you take out in a loan is not appreciating. Second, many plans won't allow you to contribute when you have a loan balance, so you are losing multiple years of contributions (including the tax benefit) while the loan is outstanding.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You said you had a job loss. If you're not currently employed, you won't be able to borrow from your 401k.

I am employed now. The job loss was was a few years ago. I was unemployed for a period of time and then took a lower paying job.

new employer won't let you borrow contributions you made in your last job, probably. check your rules.

OP said she talked with OP. Read.

She had a talk with herself? I'm reading but not understanding. What do you mean?

OP said she talked with HR. You need to read and I need to write. Ha.

[Anonymous]

I am in a similiar situation, for my ailing MIL's two-quarters late property taxes. Its just over $10K and they want their money.

I had been thinking about taking a small personal loan from my credit union @ 6.5%. Is that option viable?

[Anonymous]

I would try a credit union personal loan first. I almost did a 401K (TSP in my case) loan but was able to get a 7.9% rate at the CU and transfer the balances over. Took out the payments automatically everytime my paycheck was deposited.

[Anonymous]

OP here... I tried my credit union before considering the 401K.
They would only approve me for $ 7,000. I've never
Missed any payments but I'm close to maxed out on most cards.
I guess I'm considered high risk because of that.

[Anonymous]

I am not a financial planner, but perhaps it makes sense to take out the loan for the $7000, and use that to pay off at least some of the highest interest rate credit card first. Then, in a year, reevaluate. I am extremely opposed to pulling from a 401(k). What I might do instead of pulling from is not contribute for a year and take that money and aggressively attack the credit cards.

Also, let's say that you pay $7000 to one card immediately, and then keep paying that card down. In a few months, you might be able to negotiate a lower payment with the credit card company. While you will still have debt outstanding, the difference is that your total amount owed vs. total amount loaned ratio will be better.

[Anonymous]

PP Here. Also, forgot to add -- I know that this goes without saying, but cut your spending to the absolute bare minimum. When I was 33, I thought that there was no way I could save any more. Then, at 34, I had my DD, and voila, I had the money to pay for childcare, even though my childcare costs far exceeded any raise I received that year. Then, voila, a couple of years later, we had our second child, and somehow, I managed to take a month of unpaid leave. And, now a few years later (and with very little raises, in fact, a salary cut at one point), we managed to come up with money to buy a new car (our other car was completely paid off so we didn't have a car payment). So our expenses have increased, but our salary has not increased enough to cover our expenses. Yet we managed to find the money. My point is that when you have new expenses, you figure out how to make it work. So dig deep, there must be ways to cut. Honestly, for three months, I brought my own lunch to work, stopped buying coffee, stopped going to the car wash (and my kids LOVE it when we wash the car at home), and I now clean our own house (though that might stop, because I'm doing it at midnight and that's crazy). It saves me several thousand dollars a year. All of which could go to your credit cards.

[Anonymous]

Anonymous wrote:I am in a similiar situation, for my ailing MIL's two-quarters late property taxes. Its just over $10K and they want their money.

I had been thinking about taking a small personal loan from my credit union @ 6.5%. Is that option viable?

Why are you paying your MIL's property taxes? can't you get a heloc on her house?

[Anonymous]

My neighbor took out a 401k loan to buy a bigger house. I used to think she was nice and slightly flighty. Now I just think she's a total idiot.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I am in a similiar situation, for my ailing MIL's two-quarters late property taxes. Its just over $10K and they want their money.

I had been thinking about taking a small personal loan from my credit union @ 6.5%. Is that option viable?

Why are you paying your MIL's property taxes? can't you get a heloc on her house?

it's not what it seems, but its complicated. She had a couple of ruptured brain aneryisms (sic) a decade ago, FIL passed away five years ago. Savings is LONG gone. This has been ten years from hell.

Wife is only child, mom is in 80's in a nursing home, which we'll soon have to payt for, once we sell her house.

[Anonymous]

Anonymous wrote:I am not a financial planner, but perhaps it makes sense to take out the loan for the $7000, and use that to pay off at least some of the highest interest rate credit card first. Then, in a year, reevaluate. I am extremely opposed to pulling from a 401(k). What I might do instead of pulling from is not contribute for a year and take that money and aggressively attack the credit cards.

Also, let's say that you pay $7000 to one card immediately, and then keep paying that card down. In a few months, you might be able to negotiate a lower payment with the credit card company. While you will still have debt outstanding, the difference is that your total amount owed vs. total amount loaned ratio will be better.

OP here...thank you for the advice. I've thought about is as well. I could pay off one card with $7,000. I thought about stopping contributions but I only contribute 5% to my plan in order to get the match.

As far as cutting my budget, I will need to reexamine. I moved from an apartment to renting a room so that helped some. I have an elderly grandmother that is living on a minimal social security check so most of my "extra" money is spent helping her. I could probably cut back by cooking at home more. I leave one job at 5 to be at the next by 530 so often grab something on the way. I could try to make several meals on Sunday.

Thanks for the suggestions. I appreciate hearing from everyone.