Skip to main content
No. of Recommendations: 3
Some 401K plans allow repaying of loans on the existing terms after separation from your employer. Have you verified that you will need to pay the loan back immediately?

with 10% penalty

Federal tax penalty, your state may add additional penalties

We could take money from another 401k to repay the loan. Avoids tax consequence, but the repayment terms would be shorter, meaning a higher monthly payment. This would probably force a reduction in 401k contributions while in repayment. Which I guess technically leads to some additional tax paid, but at our marginal rate, rather than a penalty rate.

Since you already have a 401K loan, this isn't a bad option but maybe not the best. This essentially defers a decision while avoiding tax penalties. If you just purchased a house in the last year, a HEL may not be easy to obtain.

We don't have enough liquid reserves to comfortably repay the entire loan. If we did, we wouldn't have taken the loan (obviously).

With so little liquid assets outside of a 401K, keeping the cash for emergencies would be a good idea.
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.