No. of Recommendations: 3
The 401k plan im in imposes a $3 monthly fee for having a loan with them on top of a 12% interest you pay back and you can't pay extra on it. Also theres a $50 fee just for getting the loan!

But the 12% is going back into your 401(k) plan, not to Schwab or any other lender. For $36/year and a $50 initial fee, it might be a good way to actually get more money into retirement plans, assuming the borrower could afford both the loan payments and contributions to the loan.

If the borrower were to put the money received from the loan aside (in a savings account, not investng or spending it), so that they always have money to pay off the loan if they leave their job, then they could put more money into their 401(k) plan than they had borrowed, at a 12% rate. It's actually an interesting concept, assuming that the borrower has the cash flow to afford it. There have been several years when I would have loved for my 401(k) plan have a 12% return.

AJ
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