Should I borrow from my 401(k) plan? The upside

Sometimes it may make sense to borrow from your 401(k) plan.  The upsides are:

–401(k) loans can be a quick, simple, lowest-cost way to get cash needed.

–In most 401(k) plans, requesting a loan requires no lengthy applications or credit checks nor does it affect credit rating.

–If the loan is short-term loan and paid back on schedule, it usually will have little impact on retirement savings progress. In some cases, it can have a positive impact.

–Borrowers avoid any investment losses on this money.  A loan can be neutral, or even positive, in sideways or down markets.  If the interest paid in exceeds any lost investment earnings, taking a 401(k) loan actually can increase retirement progress.

–Receiving a loan is not a taxable event unless the loan limits and repayment rules are violated.

–Many 401(k)s allow loan requests to be made through a website with the amount received in a few days with total privacy.

–Some plans now offer a debit card through which multiple loans can be made instantly in small amounts.

–Most 401(k) loans can be repaid faster than the loan schedule with no prepayment penalty.

— Most plans allow loan repayments to be made through payroll deductions (using after-tax dollars).

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