401k Loans-Borrowing from Yourself



Posted: Thursday, January 14, 2010

by
Feng Shui Absolutely

In a pinch and really need cash? If you've been paying in to a 401k account through your employer a
nd have over one thousand dollars contributed and vested, you qualify for 401k loans. These loans are meant to help you out of a financial hardship. Whether it's tuition that needs paid, your car broke down or you need to catch up on mortgage payments, a loan of this type can be just what you need when you can't get money any other way.

Typically, you can borrow up to fifty percent of your vested balance from your 401k. Your vested balance is the amount of money that you have personally contributed to your 401k, not the money your company puts into the account for you. There are some restrictions with a 401k loan besides the fifty percent loan amount.

You may borrow half of the amount you have vested in your account up to fifty thousand dollars. This can be a huge help for those about to lose their homes or faced with other financial emergencies. You must remember, though-this loan will have to be repaid. You have no say in when or how much you're paying back per payment for the most part. You'll be getting payroll deductions to pay the borrowed amount back and you'll be paying interest as well.

You may be in a real pinch right now and taking a 401k loan may be your only alternative but make sure you'll be able to take care of your needs financially with a lesser amount on your paychecks. There may be penalties that you'll be required to pay because you've taken money out of your 401k. Make sure you know all of the stipulations before taking your loan.

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 millions of people escape foreclosure, helping them pay bills and taking care of their household needs. Make sure to check into all stipulations of a loan before taking the money.

Visit the Real Estate Scoop for more information on Investing in Real Estate with 401K.
Henry Fong is a Feng Shui Consultant based in Malaysia. He provide Feng Shui consultation for both residential as well as commercial properties via his on-site as well as off-site services over the Net. www.henryfong.com
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