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It sounds like you know that you are playing with fire so I will skip those comments.

You will need to crunch your own numbers, but in some situations you would be better off just withdrawing the money and paying the taxes and 10% penalty, then making your monthly payments back into the 401K to get the company match. This is because many plans do not allow you to make contributions (or get the company match) to the 401K while you have a 401k loan.

For example if you withdraw $5000 in January and then contribute $500 in each of the next ten months your $5,000 tax deduction for these contributions would match the $5K in taxable income from the early withdrawal so tax wise that would equal out. You would still have to pay a $500 penalty, but if you have an employer match that adds up to say,$1,500, then you would still be $1,000 ahead.

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