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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Thinking Of Borrowing??? Date:  10/30/2013  11:31 AM
Author:  jeffbrig Number:  307437 of 313053

I'm going to sail upwind a bit.

I'm not convinced that borrowing from a 401k is always a bad idea automatically. If the market is going to flat or down, you could actually come out ahead. Yes, you lose on potential investment gains on the borrowed amount, but conversely you're insulated against investment losses as the same time. Any interest you pay in is added to your balance - you're paying yourself that interest, not a bank.

Borrowing is essentially a hedge against a bear market. I wish I'd had the foresight to borrow $100k (or more) from mine back in August 2008. Would have saved me from the 35% dip in the market that came the next month. Then again, my crystal ball is pretty fuzzy, and I often have trouble making these things out.

Like everyone else says, there is risk, mainly associated with job loss. You also have to consider the cash flow needed to repay the loan. If you're having trouble sliding into cc debt, what makes you think you can afford to add a 401k loan repayment to your budget without further backsliding?
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