PostHeaderIcon Should I payoff my 401k loan with an unsecured debt consolidation loan with nearly the same rate?

My 401k loan plan is a fixed payment plan, pay no more or no less. I owe roughly $19K w/ 8% int. (home loan) with 6+ more years to pay off. The debt consolidation loan is for 8.99% for 5 yrs. One caveat ofcourse, is if I miss just 1 payment rate can adjust as high as 27.99! Gotta go w/ autopay deductions.
Doing this will give me more take home pay, but is it worth it?

7 Responses to “Should I payoff my 401k loan with an unsecured debt consolidation loan with nearly the same rate?”

  • Eric S says:

    No, the risk is not worth it, and the deal hurts you. Don’t do it. Find another loan deal.

  • Jill says:

    Even with autopay, what would happen if you couldn’t make a bank deposit due to unforeseen emergency?

    The risk of having to pay a 27.99% loan shark interest rate is too high.

  • C F says:

    Bank autopayments do get delayed. If the date you provided them is on a weekend, they won’t send payment until the day after, but what if the due date for your consolidation loan is on a Saturday. Those loans are merciless and breaking even unintentionally even one of the provisions of their “fine print” rules give them an excuse to hike up your rate.
    The best deal is one of those account secured loans (banks call it differently, mine calls it Pledged Shares). It basically allows you to borrow against your CD (Certificate of Deposit) or whatever account you have and charges you about 1% over your CDs current earnings rate. Say, your CD is earning 4% right now, when you borrow against it, you have to pay back 5%, but your CD is still earning 4%. Ask your bank for the programs they have. If you have a long-standing account with them, they more likely than not have a program for you (or you can join my credit union, Navy Federal). Good luck!

  • STEVEN F says:

    Given your options, I would prefer keeping the 401(k) loan. I would pile up as much as possible in a savings account to pay off the 401(k) as soon as I could. If a balance transfer to an ordinary credit card is an option, it sounds better than either of your options to me.

  • Dania says:

    Practically any type of loan can be wrapped into the debt consolidation process. Common types include finance charges, late fees and overdraft charges, credit cards, personal loans, utility bills, medical bills, car loans, store cards, gas cards and back taxes. A debt consolidation loanold loans are replaced with a new one that has more favorable terms. Your loan consultant will negotiate with creditors on your behalf, so you’ll no longer have to deal with harassing phone calls and daily mail.

  • digdowndeepnseattle says:

    Let’s see…401k loan is lower rate for longer period and it’s going to result in a lower payment if you go with the debt consolidation loan? Something is missing here unless you’re paying off other debt.

    If it’s just paying off your 401k loan sooner then I’d look at refinancing it inside the 401k to a 5 year loan. So long as your’e not extending your loan period it’s doable. though your interest rate will likely go up.

  • Jennifer says:

    I used “Credit Solution” to settle my debt and improve my credit score.They managed to reduce my debt up to 58%.It’s legitimate.I came across this company on NBC News Special Edition.Check it out here:

Leave a Reply

Powered by Yahoo! Answers