17 Oct
Which is better; borrowing from my 401(k) or a home equity loans
Before we compare the numbers, think about whether you are disciplined or not—it may have been lack of discipline in most cases that got you into all this debt to begin with. With a 40 1(k) loan you don’t have a choice. You have to pay back the loan in five years. Home equity loans, on the other hand, can go on for up to fifteen years. So you have to make sure that you don’t let the loan drag on for fifteen years, that you stick to a maximum payback period of five years, just as you would with a 401(k) loan. If you will agree with yourself to do this, and if the interest rate is favorable compared to your credit card’s interest rate, I would say in general that a home equity loan would be better.
Now let’s look at the economics.