Taking a 401(k) loan during the coronavirus outbreak: what to look for investinyou (In partnership with acorns.)
On the other hand, personal lines of credit, which are an open credit line versus a one-time loan, tend to have higher rates because they are much riskier for the bank. In that case, a 401 loan may be the better option, said Lassus."You have to make sure you have a written agreement and loan payment schedules to make sure you don't mess up the family relationship," Lassus said.If you opt to take a 401 loan, make sure that your company actually offers you the option, as not all do.
If they don't, speak with your employer. The CARES Act allows retirement plans to adopt the rules immediately. Then, determine how much you'll need. Think long-term, not just a short-term solution like covering a month's rent. However, don't go overboard. "How much do you absolutely have to have? Don't just don't look at the $100,000 available and take it," Lassus said.You'll sign a loan agreement and have to be approved. In most cases you will be, since you are borrowing your own money,Also remember that you will be paying market interest rates on the loan. The money comes from your account balance, which means in many plans it is taken from equal portions of your different investments.
That means assess your job. Are you in danger of being laid off, or do you plan to leave before the loan term is up? If so, you may want to find another source of cash. You'll be required to pay the outstanding balance of the loan.
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