Q. Is it a good idea to borrow from my 401(k) for my down payment?
A. It is probably not a good idea, for the following 3 reasons:
a. Missing Compound Growth
When you withdraw early from a 401(k), you miss the benefits of compound growth.
b. Be Forced to Pay Back
Many companies have a 60-day repayment requirement policy that if you take out a 401(k) loan, and then leave your employer, you’ll only have 60 days to pay it all back. If this ever happens, it will be very hard to deal with the payback requirement.
c. Risk of Being a Serial Borrower
Withdrawing from a 401(k) can become addictive. One study of so-called ‘serial borrowers’ found that once you take out one loan, you’re more likely to do it again—and again.
A. It is probably not a good idea, for the following 3 reasons:
a. Missing Compound Growth
When you withdraw early from a 401(k), you miss the benefits of compound growth.
b. Be Forced to Pay Back
Many companies have a 60-day repayment requirement policy that if you take out a 401(k) loan, and then leave your employer, you’ll only have 60 days to pay it all back. If this ever happens, it will be very hard to deal with the payback requirement.
c. Risk of Being a Serial Borrower
Withdrawing from a 401(k) can become addictive. One study of so-called ‘serial borrowers’ found that once you take out one loan, you’re more likely to do it again—and again.
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