Borrowing money from a 401(K) is unfortunately a pretty common practice. Though majority of people with 401(K) plans do not touch their retirement savings and take out a loan against it, there are enough people who do so, committing a mistake with serious financial repercussions.
Photo Credit: 401(k) 2013
While borrowing from your 401(K) may seem like a good idea at first glance, especially because of the convenience it brings with no credit checks required and a lower interest rate than most commercial loan products in the market, doing so often means a greater financial loss for you. If you’re major reason is to avoid the credit check requirement, then it is not reason enough because there are loan products out there, like title loans, that also do not ask for such requirements. After you’ve read our reasons for staying away from 401(k) loans, then you’ll probably end up doing the same as well.