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bigrar

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Should I borrow against my 401k?
I have some 401K loan options available to pay off 2 collections accounts and a high-interest credit card. The benefit to my credit is obvious but is there any downside? I would like to get a mortgage in 6 months. My current score is about 660 and this loan would likely bump me up fairly drastically.

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Ok I will go against the people above. Although I have very good things about Ramsey and the systems he suggests, I have borrowed from a 401k or life insurance policy being wise about it.

There are MANY MANY risks with doing what you are talking about.

1) If you leave your place of work or are fired you have to pay back that money within 90 days, or you pay the government about 40% of what you owe in penalties and taxes.  So that is a huge tax bill that if you do not pay in the first year you pay more taxes and penatlies on trying to pay Uncle Sam back.

2)You not only lose that money making money for you, but you also lose the money that the made money will make for you (compounding interest) so the longer the loan the more it costs you in lost funds.  Never compare a 10% gain on a 401k fund to a 10% credit card interest.  It is more like double.

3) Most people who borrow from 401K to pay credit cards, end up racking up the credit cards again and now are in deep trouble. Yea I know you will not be one, but statistics says that you are.

This being said, you can do what you are talking about to put yourself into a better postion AS LONG AS YOU DO NOT USE THOSE CREDIT CARDS. 

I will bet your cards are chargin you over 20% and paying those off, and reapply that money to paying yourself back is smart.  Then save for the house.  Instead of paying your 401k back money with interest, put that money aside to save for the house

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No, no, no. Because you will probably not pay it back . Also, you're subjecting yourself to double taxation. You will be charged for taking the money out of a 401k, and then charged again when you retire and withdraw the funds for income. Please find another way.

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Never 
I Repeat NEVER EVER

Again NEVER EVER Borrow agaist your 401K,

You Might want to STOP PUTTING Money into your 401k and Pay off the "2 collections accounts and a high-interest credit card. " 

Google Dave Ramsey and the 7 Baby Steps. 

Goog Luck

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