Don't touch your 401(k) until you have at least considered alternatives such as a home equity line of credit or borrowing from a family member, Mecca says.
Joel Larsen, principal of Navion Financial Advisors in Davis, Calif., insists that about the only situation desperate enough to justify a retirement account loan is one where "you have no money, you can't keep the lights turned on and you can't buy groceries." For everything else, you can negotiate.
"Even though what's facing you today can look pretty ugly, like when you can't pay your credit card bills, those can be negotiated," Larsen says.
Feeling pressure because of harassing phone calls from creditors? Send them a certified letter requesting they stop calling. Too many medical bills? Try to work out an arrangement to pay them over time before you tap into your retirement account. Even if your creditors refuse to negotiate, if you continue to make at least a partial payment each month, you won't be in default.