I don’t think that there are many people who aren’t financially struggling right now. Lost jobs and rising costs for just about every product and service that we need have caused so many of us to feel helpless and hopeless. The economy has driven thousands of families from their homes and caused millions to change the way they live. If you are in a bind and need money to take care of important necessities, 401k loans could save the day for you.
If you’ve been paying in to your 401k account and have more than one thousand dollars contributed and fully vested, you qualify for a 401k loan. You’re allowed, by law to borrow up to half of your vested 401k account balance up to fifty thousand dollars.
Keep a few things in mind when considering 401k loans. You can borrow from one thousand to fifty thousand dollars from your 401k but you’ve only got five years to repay the borrowed amount and the length depends on how much you’ve borrowed. You will pay this money back via payroll deductions every paycheck so make sure you know how much you’ll pay back each time.
Even though you’re struggling right now-obviously this is why you’re turning to a loan, to begin with-make sure you’re not going to put yourself deeper in the hole by taking the 401k loan. You will have no choice but to repay this loan back and you don’t have much control over when you make the payment, so make sure that you and your family can get by on a reduced paycheck.
You’ll of course be paying interest on the amount you’ve borrowed from your account. The nice thing about this fact is that the interest will be rolled right back into your account so in essence, you’re borrowing money from yourself and paying yourself interest. A nice thing about 401k loans is the fact that don’t need to worry about credit checks.
One big thing to consider before making the jump and taking your 401k loan-if for any reason your employment with the company ends, you’ll have one of two things staring you in the face-you’ll have to pay the loan back in full right away or you’ll end up getting taxed on all money that you borrowed. This is a pretty big deal so think about it before you take the money.
401k loans are helping people everywhere in these hard financial times. Remember that you’re borrowing from your future so do so responsibly.