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Author: BruceCM Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25214  
Subject: Re: borrow from 401k for car Date: 7/26/2010 11:49 AM
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Although you are paying yourself on a 401(k) loan, this is usually a fairly expensive auto loan relative to today's rates. Retirement plan loans must be 'substantially equal payments' that must be made not later than quarterly....most are monthly. And most TPA's will charge anywhere from $50 to $150 to 'process' your loan.

And as the previous poster mentions, most plans will require your loan balance to be repaid within some time period (often 90 days) after leaving employment...or the balance of the loan will be deemed a distribution and fully taxable to you as ordinary income for the year, plus a 10% early withdrawal penalty if you aren't yet 59.5 or have another reason for an exception to this penalty.

And just as a side note....you might want to check Consumer Reports, as Jeeps historically have one of the worst dependability ratings of all the vehicles they track. Now, had you said 'Honda' or 'Toyota'....

Check with your credit union or even your retail bank for auto loan rates, as I've noticed that they are very low these days.

BruceM
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