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Payoff Prosper Loan or 401k loan

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Payoff Prosper Loan or 401k loan

Trying to give my mom advice.  She got a settlement from car accident, and can payoff either Prosper or 401k loan, but not both, what the best advice.  She only has 2 cc and both low.  I told her not to put in savings,  payoff debt.  

 

401k - 5%, owe $19500 - bi-weekly pymt = $215

Prosper -10.25%, owe $13500, monthly = $306.23 (5 years)

 

I told her Prosper cause of interest rate.  Am i wrong.  

 

Message 1 of 4
3 REPLIES 3
Valued Member

Re: Payoff Prosper Loan or 401k loan

I’d say the same
Discover IT | Cap1 Quicksilver | Cap1 Venture One
Message 2 of 4
Senior Contributor

Re: Payoff Prosper Loan or 401k loan

Many will tell you "Never borrow from your Retirement Funds!", and that's generally good advice. But, for your mom's personal finances, she's paying that 5% interest on the 401k loan to herself, the interest is credited to her 401k balance. (Depending on the 401k plan there might be a small admin fee for administering the loan, but the bulk of the interest payment is credited to her 401k balance.)

The 10.25% interest to Prosper is throwing money out the window, it goes straight to Prosper. Pay off Prosper.


Fico 08: 734/716/734 TU/EX/EQ
Message 3 of 4
New Member

Re: Payoff Prosper Loan or 401k loan

thanks everyone, whew.   i am learning.  I will talk to my mom

Message 4 of 4
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