So you're drowning in debt and desperate for a way out. A friend or relative asks if you've considered a 401k loan. “They're quick, simple to qualify for, and here's the best part: you're paying the interest to yourself.” Sounds like a brilliant solution, right? Why pay 25% interest to a credit card company when you could be paying 6% interest to yourself? Stop. You want to think long and hard before you take out a 401k loan, especially if you're already in debt.
Fayetteville debt relief, the most important thing to know is that, in bankruptcy, your retirement savings – 401k accounts, pensions, 403b accounts, traditional IRAs, Roth IRAs and even plans for small business owners and the self employed – are protected from your creditors. That bears repeating. If you declare bankruptcy, you keep all the money in your retirement accounts. If you've taken the money out in the form of the loan, however, your creditors can take that money. Moreover, failure to pay back a 401k loan comes with serious drawbacks. If you lose or change jobs, you have to pay back the entire sum within 60 days. If you're unable to make payments on the loan – or the lump payment in the case of changing jobs – you're required to pay all taxes on the outstanding money, plus a 10% penalty.