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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Re: 401k Borrowing Date: 10/30/2007 5:28 PM
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>> When I borrow against my 401k, does the interest I pay back on the loan accrue to me? As in, am I really lending myself the money and paying myself interest? Or is my 401k simpoly collateral securing the loan, and the itnerest I pay goes to the 401k administrator? If the latter is the case, do my funds stay invested? <<

You are repaying yourself. If you borrow at 9%, for example, the 9% does get credited to your account. As far as the administrator, a loan typically has a small origination fee (think $50 or so, give or take) plus a few bucks for every quarter the loan is open.

Note that you pay tax twice on every dollar of interest you pay; you pay the interest with after-tax dollars, and then those dollars are taxed again when you withdraw it years down the road.

>> I am not looking for advice on whether I should do this. <<

I suspect that's because you already know almost everyone would advise against it. :-)

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