Saturday, May 22nd, 2010

if i borrow from my 401k does that build credit like a loan?

borrow build credit
alb asked:


i was thinking of borrowing money from my 401k will that be like a loan and if so will i build credit has anyone done this and if so how do i even borrow my mom told me i can borrow money from it

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This entry was posted on Saturday, May 22nd, 2010 at 12:00 am and is filed under Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “if i borrow from my 401k does that build credit like a loan?”

CommonCents Says:
May 22nd, 2010 at 4:47 pm

It does not help you credit at all, and you have to pay it back by deductions from your paycheck.
Not a good idea unless you are desperate.

Brian G Says:
May 24th, 2010 at 3:54 pm

No, it doesn’t affect your credit in any way. You are just borrowing money from yourself and paying yourself back, usually with interest. Whether you should borrow it is widely debated. If you are making a good return on your investment, you are losing that increase in the value until the loan is paid back. A regular loan may cost you less if you can get an interest rate lower than what you are making on the 401K, plus it will help build your credit.

c q Says:
May 25th, 2010 at 7:50 pm

No, No. You will have to pay it back with interest, plus you get hit twice, once with a penalty for borrowing and second you have to pay taxes on it like earned income. A loan neither of the last two apply. Don’t do it.

Michael H Says:
May 26th, 2010 at 11:21 pm

Apply within your company, ask the Finance department.
In most cases you can borrow up to 50 grand or 50% of the balance, whichever is smaller.

Advantages: quick cash, no credit approval process, low interest rate, and you avoid 10% penalties if you were to withdraw(income taxes)
Disadvantages: slowing growth of retirement fund, consider your age. If you’re somewhat young, go for it, if you have a stable predictable income. Also, payback is through payroll deduction, consider smaller future income(net not gross)

Use this method as a last resort, it will not build credit…in fact you’re probably better off with a regular bank loan.

Charlie D Says:
May 30th, 2010 at 5:44 am

Never borrow from a 401K plan. You short growth opportunity. Also, proof that you pay rent, car payment, etc… on time is good enough to boost your credit score.

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