The 401(k) Loan – Is it For You?
November 20, 2009 // Posted by: Insider // Category: Loans & Credit, Savings
401(k) loan is an arrangement where employees may take out an amount from their future retirement fund. It comes in handy at crucial stages of life and is a plausible alternative. It has a few downturns however.
It is not a gift from the employer, but a loan taken from your own fund. The method of repayment is generally simple and it is settled in 1 or 3 year schemes. But you may just have to pay the interest out of your budget, if you are a methodical man.
There is also the subject of double tax as each time you take out money fro the fund, you get tax disadvantage. Those who file their IT returns do not like this particular idea. You have the pleasure, though, of not bowing before someone else for the emergency money.
It also gets you in a habit of loans, which may spread. You should therefore try to stay away from the affair unless urgent.