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do it. Think of it as a diversification of your funds...so whatever mix you have...just think of this amount as in a "Bond Fund/Fixed Income"...I don't see many bonds paying 5% right now. You have payments...why should someone else get rich of your dime?
I have student loan = $34k @ 8.25 fix and I can't consolidate
my 401 k =$187 k
when I called my student loan I was told that I need to pay @ least $243 just to keep the account from going delinquent but I will always owe the 34k. so I decided to call my 401k rep. I can get 34 k @ 4.25 and pay bi-weekly $138 for 5 years. My contribution to my 401 k is 19% . so what I am thinking is lower my contribution to 6 % , because that what my company matches and have them take $138 a paycheck. I asked the 401k rep if I loose my job tomorrow what are the scenarios , he state that 401 k institution will wait 90 days, if no payment is received they will report the remaining balance on the 401 k to IRS and it will count as income and I will be taxes for it.
So I rather pay $34 k of loan in 5 years and have my student loan paid and I do not have to worry about , or pay $243 to the student loan and owe $34 k all my life.
one thing I forgot to ask is that I own a house, I have been in the house for 4 years now. My house can be sold for about 60 k more then the price I Paid for 4 years ago ,
Mustang,
DO IT!
It makes sense, in every way, to pay it off and pay less interest.
That is a no brainer.
You are paying off a HIGH interest loan that will NEVER GO AWAY with
a LOW interest loan that is insecured.
You will have it paid off, and if you want, pay it off early, don't
blow the money, see if you can cut a year off since the payments
WILL BE ALOT LOWER.
You are right, DO IT!
I agree as well this person as well, I was just thinking about doing this for my student loan which is 8k balance this month as well but instead I am going to wait til next year then I am doing a 401k loan to buy a low cost rental property investment in cash that will give me a positive cash flow return which would be more than the 401k can guarantee me. Most folks are barely getting 5-7 % in for returns in this market in this high risk volatile market. You are getting a 3.3 vs 10% loan rate. Save $$$ on interest and take out the loan to pay it off.
Now another question can you pay that 401k loan off in under 2-3 years? I would not let it linger out to the max 5 year term life of the loan if you can pay it off earlier do so.
And yes you are paying yourself back the interest so it goes back into your 401k.
The 401k is a good leverage tool if you use it the right way.
Since you seem to be a financial guru, where do we go from here now that stocks are at record highs? Are we still at 'anyone who isn't funneling every possible dollar into stocks is an idiot'? Or is it time to lock up some gains and spread it around?
It really time to lock up those gains and move out. Market has been in a downtrend for the last 3 weeks. I have pull most of mines back to Money Market. I have a feeling a huge pull back is a comin
See my above response about following 4-6 week market trends. At this point, I DO think we're still going up. A lot of individual investors who sat the last few years on the sidelines are still moving money back in. The housing market is healing and growing.Unemployment is going down. Companies are reporting pretty good profits. Consumer spending is ticking upwards. All signs - except for the artificially low interest rates - look positive for the near term market.
The housing market is being inflated again. Banks are removing properties off market to inflate prices in certain areas but the homes have not been sold.
Unemployment - It is hardly going down. Our gov't just has stop counted the folks that have been unemployed for long periods of time who are no longer able to collect.
Consumer spending -- I don't know too many folks that is buying much of anything because most middle class and the poor are broke. They are barely keeping their heads above the water.
I have hard time believing you made 10% to 16% gain in 2011.
That's way off the chart for the market!
I don't know about the other person, but I know for myself I made about 15.5% percent with mines over the last 12 months. Over the last 3 year the rate of return was 13.7% but to achieve this I was constantly watching it like a hawk moving my money in and out of funds re-balancing until I made a decent amount of profit without being greedy and move it out and waited for the next pull back to re-enter again. To be able to do this you have to be near by a computer everyday and have the ability to watch what the Dow and S&P and economy is doing and make the trade by 4pm if necessary before the close of market hours. If not you will have a difficult time trying to achieve a decent yearly return instead you will end up riding the market up with your money then back down again which most folks end up doing with these 401k. I really don't like the aka 401k Ponzi scheme because most of the employer ones really do suck and they have a very limited amount of fund choices to invest.
I have student loan = $34k @ 8.25 fix and I can't consolidate
my 401 k =$187 k
when I called my student loan I was told that I need to pay @ least $243 just to keep the account from going delinquent but I will always owe the 34k. so I decided to call my 401k rep. I can get 34 k @ 4.25 and pay bi-weekly $138 for 5 years. My contribution to my 401 k is 19% . so what I am thinking is lower my contribution to 6 % , because that what my company matches and have them take $138 a paycheck. I asked the 401k rep if I loose my job tomorrow what are the scenarios , he state that 401 k institution will wait 90 days, if no payment is received they will report the remaining balance on the 401 k to IRS and it will count as income and I will be taxes for it.
So I rather pay $34 k of loan in 5 years and have my student loan paid and I do not have to worry about , or pay $243 to the student loan and owe $34 k all my life.
one thing I forgot to ask is that I own a house, I have been in the house for 4 years now. My house can be sold for about 60 k more then the price I Paid for 4 years ago ,
what you think . Thank you
It makes sense to take the 401k loan. You just did the math and you come out on top and pay less interest out. My question to you who would you rather pay interest to the student loan people or yourself?
Also worst case scenario if you loose your job, how much equity do you have in your home. Could you pull from there to pay it off if it came to that?
Pros:
You borrow your own money and pay interest to yourself
The loan payment does not count against your DTI since it is secured by your own financial assets
Does not report on your credit report
Is a good way to get guaranteed returns on the money invested in your 401k
You get $$$ using your own resources, and take advantage lower interest rates the 401k loan offers vs the banks/ conventional lenders (You can tell to go screw themselves.. lol )
Cons: You pay back this loan with "after tax" income... to me this is no big deal because you also have to pay back car loans and credit card bills and home loans with "after tax" money... no difference in my opinion
If you leave your job and do not repay the loan, you will be taxed on the unpaid balance of the loan.
Since your 401k loan money is not invested in a mutual fund, you may miss out on the growth that you could see if it were in a mutual fund... For example, if you borrow 3k, and then the stock prices rise by 12%, you miss out on the opportunity to grow your account by 12%, and instead you grow your account by only 4% (interest rate of loan). Opportunity Cost lost but again we do not know where this market will go in the future it could go up big or it could go down big or trade sideways.
It is a debt that will have to be paid back, and the payment effectively lowers your disposable income during the repayment period.
tt0001 .. Thanks, I agree totaly on what you saying. That is the route that I will be taking .. 5 years is nothing when you are in my age .. the times flies quickly . I have about 80 to 90 k as equity .. as july second. I am sending the student loan a check and in the Botom I will write <go *********rself> lol
Unemployment - It is hardly going down. Our gov't just has stop counted the folks that have been unemployed for long periods of time who are no longer able to collect.
In reality, whether or not one is receiving unemployment insurance benefits has NO EFFECT AT ALL on the unemployment rate. That rate comes from responses to the monthly Current Population Survey of about 60,000 US households. The pertinent questions there are "Do you currently have a job?" and "If not, have you actively looked for work in the past four weeks?" This is a pretty basic thing to have bungled so badly. Phony pretensions of having insight into what the government has or has not just done only make things worse.
Meanwhile, the number related to 401-k loans that people often overlook is the present and future tax-free growth inside the account that is foregone when you pull money out. What would have happened inside the 401-k had you done nothing is the standard that alternatives have to be compared to.
Last edited by oaktonite; 06-27-2013 at 11:02 AM..
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