4 reasons to take out a 401(k) loan

It's the lowest-cost loan available
It's the lowest-cost loan available © Brian A Jackson/

It's the lowest-cost loan available

Robert Gordon, senior financial adviser with Investor Solutions in Coconut Grove, Fla., says a 401(k) loan could be a useful option for people who have problems getting credit at affordable rates -- for example, someone whose credit score has plummeted because of bankruptcy or a short sale.

"When they get ready to go into the market, instead of subjecting themselves to two (percent), three (percent) or four percentage point increases in rates or not getting credit at all, (a 401(k) loan) could be a resource," Gordon says.

Just remember that the interest you save by choosing a 401(k) loan over a bank loan still might not be enough to make up for your loss of earnings from taking the money out of your retirement account.

Bankrate's 401(k) loan calculator shows you how much your retirement nest egg stands to lose if you borrow from your 401(k).


Show Bankrate's community sharing policy
          Connect with us

Be An IRA Expert

Lessen the retirement tax bite

Worried about retirement income? Follow these 5 strategies to lessen tax liability.


Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.


Jennie Phipps

Feds fight to thwart ID thieves

The IRS, Federal Trade Commission and Social Security Administration are taking steps to protect consumers from identity theft.  ... Read more

Partner Center

Connect with us