401K loan?????? - Page 2

[A&A]

We obviously see things differently.

Suze Orman says don't borrow against your house, because then you're trading unsecured debt (they can't take anything away from you) for secured debt (where they CAN take your house away if you miss the payments.) Trading unsecured debt for secured debt is never a good idea.

And I hope to heaven that you're right about peak oil not being that big of a deal. But since I've heard it called "economic Armageddon," it has me a little worried.

[velochic]

Originally Posted by A&A

We obviously see things differently.

Suze Orman says don't borrow against your house, because then you're trading unsecured debt (they can't take anything away from you) for secured debt (where they CAN take your house away if you miss the payments.) Trading unsecured debt for secured debt is never a good idea.

And I hope to heaven that you're right about peak oil not being that big of a deal. But since I've heard it called "economic Armageddon," it has me a little worried.

I agree to disagree, too. Now we agree on something.

Suze Orman does not impress me. She is simply a woman with a good head on her shoulders... with sass. She isn't a guru. She is certainly not a financial authority. She just makes herself out to be one, does it well, and sells herself like so many other marketing icons. You and I are just as smart and informed... she just has the network behind her. I am Suze Orman, though I hope not as offensive. You are Suze Orman, too. She is truly nothing special. I hope people don't buy into her hype.

[Herausgeber]

But borrowing against your 401(k) to pay off credit card debt IS trading unsecured debt for secured debt. The 401(k) loan is no different from a home equity loan in that regard. Your retirement account secures the loan, just like your house would be in a mortgage. The terms for a 401(k) are generally worse than a home equity loan, though, and as velochic already pointed out, you run into some nasty tax repercussions with the 401(k) loan that are compounded if you lose your job before you pay off the loan. That happens precisely because the loan is secured by your retirement account.

Velochic is very wise, especially about the psychological issues at play with being able to "instantly" pay off consumer debt. I think there's something to be said for paying it off the way you ran it up. It makes you less likely to just run the cards back up again.

I'm constantly amazed at the lengths people will go to to save a few pennies (rinsing baggies, for instance) in the name of "frugality," while thinking nothing of behaviors that cost them thousands -- if not hundreds of thousands -- of dollars.

[velochic]

Originally Posted by Herausgeber

But borrowing against your 401(k) to pay off credit card debt IS trading unsecured debt for secured debt. The 401(k) loan is no different from a home equity loan in that regard. Your retirement account secures the loan, just like your house would be in a mortgage. The terms for a 401(k) are generally worse than a home equity loan, though, and as velochic already pointed out, you run into some nasty tax repercussions with the 401(k) loan that are compounded if you lose your job before you pay off the loan. That happens precisely because the loan is secured by your retirement account.

Good point!

[velochic]

Originally Posted by A&A

And I hope to heaven that you're right about peak oil not being that big of a deal. But since I've heard it called "economic Armageddon," it has me a little worried.

Who in the world called oil prices "Economic Armageddon"???? God forbid the US actually put money into CONSERVING resources rather than waste them. Oh, yeah... the Bush administration. Nevermind. : Wouldn't want Cheney to lose a dime.

Why is it that oil is so important only in an time when the administration is made up of oil barons?

Don't believe everything you read. Oil is not a big deal... except for those in the White House who happen to have all their money in oil.

[A&A]

Originally Posted by velochic

Who in the world called oil prices "Economic Armageddon"???? .

Not just prices, per se, but the actual dwindling supply of oil.

http://www.lifeaftertheoilcrash.net/

[A&A]

Another question/thought about 401ks, 401k loans:

The experts say to put your money into debt first, then a 401k, right? So, say, for example, oops, I put already put money into a 401k even though I have lots of debt. So, if I wasn't supposed to put anything in there in the first place, why would the experts be against me taking it out? That's a twist of logic that I just don't quite get.

[velochic]

Originally Posted by A&A

Another question/thought about 401ks, 401k loans:

The experts say to put your money into debt first, then a 401k, right?

Actually, they don't. You should contribute to your 401(k) up to the matching dollars by employer, no matter what your consumer debt amount might be. That's a GUARANTEED 100% return on your money.