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rubenerivera

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Finance company vs. credit card to rebuild credit..
I am trying to rebuild my credit after a bankruptcy. I got a couple of loans with two different finance companies. I am thinking about paying those off with a loan from my 401K and opening 2 credit card accounts instead. Does that make any sense?

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DO NOT touch the 401K!!!

First off, you'll be taxed on the money and will pay a penalty also if you are not of retirement age.  Second, you lose the interest income you would have had by leaving the funds in  the account and Third, very few people ever pay back the money they borrow, leaving them hurting when retirement time comes around.  Does your employer match at least part of your 401K fund??  Better to pay off the finance company (and their outrageous interest) and get secured credit cards if you are not able to get a regular card.  Finance companies offer "services" to those who are not able to get a loan elsewhere, but they are a rip-off.  Stay away from them after this.  Read the information on this site and utilize the tools here so you can learn how to make your money go farther and build your credit score.

Top Contributor
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not quite right

A 401k loan is not taxed or penalized unless it is defaulted on.  Many employers offer this program.  I do agree that it is a bad idea to borrow against your future.  The power of tax deferral and compound growth is huge.  A common oversight with 401k loans is the original monies were contributed pretax but the loan payments are made with post tax dollars.  Based upon your tax rate you will find this to be very expensive money.  I personally do not think there is a worse choice.  Don't sell tomorrow for today.

Hope this helps

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