A 401 (k) plan is a great place to borrow funds for a short-term emergency or large purchase. However, there are pros and cons to doing this. And in some instances, there are risks.
What Is a 401(k) Loan?
A loan from your 401(k) is not a true loan. There isn’t a lender, and you don’t need to worry about your credit history. It’s just an opportunity to access your retirement savings early. When you repay your loan, you will have restored your 401(k) plan to its previous condition.A 401(k) loan can be for up to $50,000 or 50 percent of your vested balance, whichever amount is smaller. The interest rate is usually determined by the plan administrator, based on the prime rate.
