The Pros and Cons of Taking Out a 401(k) Loan
Pros:
- Easy access to funds without a credit check
- Low interest rates compared to other types of loans
- Repayment goes back into your own retirement account
Cons:
- Potential tax implications and penalties if not repaid on time
- Risk of reducing your retirement savings if you can’t repay the loan
- Limited investment growth potential while the loan is outstanding
Overall, taking out a 401(k) loan can be a viable option for accessing funds in a pinch, but it’s important to weigh the pros and cons carefully before making a decision.