@Anonymous wrote:
I have about $7000 in debt between me and my wife. I pay roughly $1,100 a month in payments. I can get a loan against my 401k to pay off all debt and I will lose $800 a month in pay for 12 months. I am wondering if this is a smart choice. It will save me about $300 a month plus I am sure a large amount in intrests. The interest and loan fee's for the loan will be $173.
So I am just looking for advice before I get the loan and jump all in.
The calculator smart answer depends a lot on info we do not have.
1) What are the real loan balances, payments, interest rates
2) What kind of 401 Interest is being earned, are you losing matching contributions, etc.
With the 401k loan you are paying interest for the new loan, giving up compounding interest gain, maybe losing matching contributions, and in debt longer. Even with very high interest rates 1100/mo on 7000 is less than 7 months and out of debt. I would lean to not borrow from the 401k for such a small, short time debt even if it cost me a little more interest. It might not even be costing you more.
I also don't understand the numbers provided
800 a month for 12 months = 9600, 9600-7000 = Cost of loan as $2600
@7000 @ 17% and 1100 payment = interest loss ~$400
