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Personal Finances / Credit Cards and Consumer Debt

URL:  http://boards.fool.com/johnnstace-gt-once-again-it-depends-on-the-401k-12258552.aspx

Subject:  Re: Update Date:  3/22/2000  6:44 PM
Author:  ajlenze Number:  30255 of 308232

johnnstace > Once again it depends on the 401k plan. The current investment options in my 401k are actually either lossing money [or] returning about 1%. A loan on these is actually a BETTER deal at the moment as far as growth.

Be careful, you're making a Wise statement there. If your investment option is returning about 1%, I'm guessing that it's either a stock fund, similar to the S&P 500. (Otherwise switch to a fixed-income/money market fund and you should be getting over 5%.) By saying that it's better to take a loan out to pay off credit card debt, you're actually timing the market, and all we Fools know how futile the Gardners think that is.

That being said, assuming that your 401K plan is in an S&P index fund, which has averaged 11%, it's a pretty good idea to borrow this money to pay off a credit card, especially if it's a very high interest (over 18%) card. And the added benefit of paying the interest to yourself makes this an even better deal. Just be aware that if the market takes a big upturn, you could be missing out.

Drew
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