Henri66 - Loans are when you will repay what you have taken out of your 401K without having to pay the penalties or taxes on it because you are repaying it. If you withdraw this is taking the money from the plan this option is where you must then pay taxes as well as penalties. Some financial folks disagree with taking loans from your 401K because until you fully repay the loan it temporarily reduces your investing amount but I think of it this way, if you are in need of the money to pay off HIGH Interest CC debt just as I did why would I go to a bank for a loan when I am in a since borrowing from myself and paying MYSELF back with interest to my plan.
So to answer your question, a “loan” from your 401K plan SHOULD not go on your credit in any way. This will come right back out of your payroll check.
I'm looking to purchase a house soon. However, i do have a CC debt of about 25k, which has been keeping my score down (below 700). I have a 401k worth about 200k and a stable occupation. I m looking to get a boost in my Credit score and qualify for a cheaper loan; does it make sense for me to borrow from my 401k and pay down my CC debt? Does this money borrowed from 401k have a negative effect on my Credit score and on my ability to get a mortgage loan?
I would appreciate any comments, thoughts, concerns, issues that might arise from this.
ScoresUP wrote:NO TAX or Penalties on a loan since you are repaying only a withdrawl where you would not be repaying. Only if you voluntarily or involunterily leave your job.