401k loan: In this country we are taught that the solution to any problem is to borrow. Therefore, there are loans of colors and flavors. Loans have to reward people who have good credit, you are rewarded by giving them a good percent interest on your next 401k loan.
And you also have loans for those who did not pay well and end up paying a higher percentage of interest. Often as people already exhausted other options are borrowing money from your 401K retirement account as a good option.
Until you actually marketed the product with the extra advantage that you can take out a 401k loan of up to $ 50,000 or 50% of what you have in your retirement account, whichever is less. The money you withdraw you get it no matter how bad your credit this. Another advantage is that you sell the interest you are paying you pay them yourself.
All these supposed advantages really are not. One of the worst things you can do is to take one of these loans and will explain why.
Your retirement money is only going to leave you. This is the main reason why you should not touch this money. If you do not contribute to your retirement nobody will do for you. We all know that social insurance (or social insecure as many people called) will not be available for much longer. So, the money for your future can only come from you. Every time you take a 401k loan from your 401 K are putting your future at stake.
People ask more than one 401k loan. Most people who take loans from 401K takes more than one. In fact for many the 401K becomes the hen of the golden eggs and if you remember the little hen went sour in the story.
Contributions to retirement are less. When you get one of these loans is very likely not contribute the same amount as before contribuías your retirement, to repay the loan faster. This affects the growth of your account and the long-term consequences are huge.
Your return on investment is not so good. Even if you return the money with interest, the return on your investment that you would receive with mutual funds is much higher. Furthermore, when you receive an investment interests someone else is paying these interests when making a 401k loan you are who pays the interest. This is another way you can lose tens of thousands of dollars for retirement.
Borrow money on your future is a very bad business. And people love to present extreme examples because they had to take the borrowed money. But the reality is that almost any excuse to justify a 401k loan.
Remember that money for retirement can not leave anywhere else.