401k loan?

Shank · 05-27-2008, 10:09 AM

Here's my situation:

I have $25k in savings, I own my car outright, and I have no consumer debt. Alas, I have $34k in student loan debt, $25k at 8%, the balance at 4%.

I have $210k in my 401k account. Our plan permits loans of up to $50k and you can choose the interest rate to be 6%, 7%, or 8%.

I'm sorely tempted to borrow $25k from the plan to pay my student loan. I figure if I do it at 8%, I don't stand to lose much by way of investment growth (in fact, I am likely to outperform the market over the next 2 years). That way, I'm paying myself the interest rather than someone else.

My income is such that I do not get to write off student loan interest, so I don't lose a write off by doing this.

Thoughts?

jdp · 05-27-2008, 11:30 AM

What rate would you be giving up on your savings if you just used it? Use it to pay the 8% portion and rebuild your savings while enjoying that nice low 4% portion. IF you must pay it off.

Shank · 05-27-2008, 12:07 PM

Quote:

Originally Posted by jdp

What rate would you be giving up on your savings if you just used it? Use it to pay the 8% portion and rebuild your savings while enjoying that nice low 4% portion. IF you must pay it off.

I get 3.50% on my savings. I don't want to apply the savings to pay it down because I want to keep 6 months of living expenses in the bank.

I don't have any particular requirement to pay off the debt, other than the desire to be debt free.

I just wonder if it makes more sense to pay myself 8% interest, rather than my lender.

Shank · 05-27-2008, 01:48 PM

Additional Facts:

I would continue to max out my contribution ($15,500/year) while the loan was outstanding.

I would pay the loan off in 2 years.

Heisenberg · 05-27-2008, 02:10 PM

Be careful with the 401(k) loans. If you ever leave your job, or it leaves you, the loan must be paid back immediately.

Xin Lu · 05-27-2008, 05:24 PM

As far as I know, student loan interest is deductible on your tax forms. It is also amortized so if you pay off more of the principal you don't pay as much as 8% in the end. I would suggest just paying off the loan and not borrow from your 401k because your actual costs on the student loan isn't as high as 8%.

Shank · 05-27-2008, 08:19 PM

Quote:

Originally Posted by Xin Lu

As far as I know, student loan interest is deductible on your tax forms. It is also amortized so if you pay off more of the principal you don't pay as much as 8% in the end. I would suggest just paying off the loan and not borrow from your 401k because your actual costs on the student loan isn't as high as 8%.

The student loan interest tax deduction phases out as your income increases. If your adjusted gross income exceeds $70k it is not deductible at all.

fredrickjones · 06-17-2008, 04:17 AM

Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply.fffloans@msn.comKind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.

fredrickjones · 06-17-2008, 04:18 AM

ID is: 48294899 Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply.fffloans@msn.comKind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.

fredrickjones · 06-17-2008, 04:20 AM

ID is: 48294899 Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply(fffloans@msn.com)Kind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.

05-27-2008, 10:09 AM	#1
Shank Junior Member Join Date: May 2008 Posts: 5 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (11)	401k loan? Here's my situation: I have $25k in savings, I own my car outright, and I have no consumer debt. Alas, I have $34k in student loan debt, $25k at 8%, the balance at 4%. I have $210k in my 401k account. Our plan permits loans of up to $50k and you can choose the interest rate to be 6%, 7%, or 8%. I'm sorely tempted to borrow $25k from the plan to pay my student loan. I figure if I do it at 8%, I don't stand to lose much by way of investment growth (in fact, I am likely to outperform the market over the next 2 years). That way, I'm paying myself the interest rather than someone else. My income is such that I do not get to write off student loan interest, so I don't lose a write off by doing this. Thoughts?

05-27-2008, 05:24 PM	#6
Xin Lu Wise Bread Blogger Join Date: Jan 2008 Posts: 441 Thanks: 0 Thanked 3 Times in 3 Posts Reputation: (92)	As far as I know, student loan interest is deductible on your tax forms. It is also amortized so if you pay off more of the principal you don't pay as much as 8% in the end. I would suggest just paying off the loan and not borrow from your 401k because your actual costs on the student loan isn't as high as 8%. __________________ The Baglady @ http://baglady.dreamhosters.com Wise Bread @ http://wisebread.com/xin-lu Following me @XinLuDJ

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05-27-2008, 11:30 AM	#2
jdp Senior Member Join Date: Jan 2008 Posts: 227 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (29)	What rate would you be giving up on your savings if you just used it? Use it to pay the 8% portion and rebuild your savings while enjoying that nice low 4% portion. IF you must pay it off.

05-27-2008, 01:48 PM	#4
Shank Junior Member Join Date: May 2008 Posts: 5 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (11)	Additional Facts: I would continue to max out my contribution ($15,500/year) while the loan was outstanding. I would pay the loan off in 2 years.

05-27-2008, 02:10 PM	#5
Heisenberg Junior Member Join Date: May 2008 Posts: 7 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (10)	Be careful with the 401(k) loans. If you ever leave your job, or it leaves you, the loan must be paid back immediately.

06-17-2008, 04:17 AM	#8
fredrickjones Junior Member Join Date: Jun 2008 Posts: 10 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (10)	Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply.fffloans@msn.comKind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.

06-17-2008, 04:18 AM	#9
fredrickjones Junior Member Join Date: Jun 2008 Posts: 10 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (10)	ID is: 48294899 Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply.fffloans@msn.comKind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.

06-17-2008, 04:20 AM	#10
fredrickjones Junior Member Join Date: Jun 2008 Posts: 10 Thanks: 0 Thanked 0 Times in 0 Posts Reputation: (10)	ID is: 48294899 Hello I am a certified loan lender.I offer secured/unsecured loans to individuals and companies at low interest rate.I offer long and short term loans.My firm has recorded a lot of breakthroughs in the provision of first class financial services to our clients especially in the area of Loan syndication and capital provision for individuals and companies. We have brought ailing industries back to life and we back good business ideas by providing funds for their upstart. We have a network of Investors that < DIV>are willing to provide funds of whatever amount discreetly to individuals and organizations to start business and operations. We also recruit Agents to assist our client companies to receive payments for their goods and services. In our bid to be useful to you, please contact us as soon as you can and indicate how this firm will be of very useful effect to you .Looking forward to your reply(fffloans@msn.com)Kind Regards, Richie BanksRep.Fredrick Financial AgencyP.O. Box 1390, Stn. B, bulham, ON M9L 2W9 Uk.