The Pros and Cons of Taking Out a Loan Against Your 401k
The first thing to know about a 401k is that it is primarily your money. The second thing to remember is that 401k’s have both pros and cons that need to be considered before taking a loan against your 401k.
In this article, we are going to explore both sides of the argument.
Pros of 401k Loans
First, let’s talk about the advantages. If you have enough money in your 401k, you can take out any size loan that you require, in addition to paying interest to yourself. This is because any interest you pay will go back to the 401k plan. There are other benefits, too, such as individuals not requiring co-signers or credit checks to take out a loan. The money is readily available, and while penalties for defaulting on a loan are severe, they are not as harsh as defaulting on a conventional bank loan.