401k loan

[sophie]

So no one will give us a lease or a loan. NO ONE! We've leased our last 7 cars so we didn't think we'd have a problem. We always paid them on time and they are not in the bk. Even our lawyer was surprised. They won't even let us buy out the lease.

Anyway, the only option we have is to take a loan against my 401k or take out all the money from my IRA (I'm almost at retirement age). I spoke to our lawyer and he said the 401 was the better way to go since we'd still have a loan and our payments would be the same as what were confirmed with.

My question. I know when you make a large deposit in the bank they notify the treasury dept. What exactly happens then? Does this sound off an alarm that we have all this money in our account (although it will be out of our account in a few days once we buy our leases) and we are in bk? Will they notify my trustee?

BTW: Someone told me that with all the bks out there, the trustees don't have the time to audit people randomly as long as you're paying your monthly to him. Is that your experience as well?

Thanks everyone for your help.

[NASCAR20FAN]

So no one will give us a lease or a loan. NO ONE! We've leased our last 7 cars so we didn't think we'd have a problem. We always paid them on time and they are not in the bk. Even our lawyer was surprised. They won't even let us buy out the lease.

Anyway, the only option we have is to take a loan against my 401k or take out all the money from my IRA (I'm almost at retirement age). I spoke to our lawyer and he said the 401 was the better way to go since we'd still have a loan and our payments would be the same as what were confirmed with.

My question. I know when you make a large deposit in the bank they notify the treasury dept. What exactly happens then? Does this sound off an alarm that we have all this money in our account (although it will be out of our account in a few days once we buy our leases) and we are in bk? Will they notify my trustee?

BTW: Someone told me that with all the bks out there, the trustees don't have the time to audit people randomly as long as you're paying your monthly to him. Is that your experience as well?

Thanks everyone for your help.

2 Things:

1-I work for a bank and banks do not notify the FEDS of anything. If anything, depending on your banks policies, they can hold the check until they know it's good (only up to 9 budiness days)

2-You shouldn't do a loan from you 401(k). Your retirement savings are protected in BK.

[sophie]

Nascar20fan

Will your bank give me a car loan?

The 401k loan is my only option. Unless you can think of one I haven't thought of.

[NASCAR20FAN]

Will your bank give me a car loan?

The 401k loan is my only option. Unless you can think of one I haven't thought of.

You said you were close to retirement right?

And this is for a car lease?


Your 401(k) has not hardship withdrawal provisions?

[sophie]

I'm close to retirement but not there for another couple of years.

The 401 is to buy out the lease. So it would be a loan. Our first option was to get a new lease car but no one would give us a lease. Then we thought we could take a loan out to buy the cars but no one will give us a loan. So I would have to take a loan against my 401.

[NASCAR20FAN]

I'm close to retirement but not there for another couple of years.

The 401 is to buy out the lease. So it would be a loan. Our first option was to get a new lease car but no one would give us a lease. Then we thought we could take a loan out to buy the cars but no one will give us a loan. So I would have to take a loan against my 401.

How much are you talking about?

You have to keep in mind that if you take a loan and you cannot get it fully paid back before you actually retire. There are 3 things that can happen

1-You will have to pay back the balance of the loan in full

2-You will have to make monthly payments at a higher rate

3-Your 401(k) plan can close your account and send you the difference.

Do you know what they are going to do if you cann pay it back in full before you retire?

[sophie]

I will be able to pay it back over the 5 years. I won't be retiring until then.

I just didn't know if anyone knew who would give a loan to Chapter 13 people or if there were any other options.

I really appreciate your help.

[MajorMike]

A 401K loan is NOT a bad idea. You're paying yourself back with interest. As long as you know you can do it in 5 years, there is nothing wrong with that.

[NASCAR20FAN]

A 401K loan is NOT a bad idea. You're paying yourself back with interest. As long as you know you can do it in 5 years, there is nothing wrong with that.

Sorry Mike, but your wrong! Borrowing from you 401(k) in never a good idea. If for any reason you cannot pay that money back, you'll have a problem. Not to mention that you'll be paying double taxes on that money! 1st when you withdrawal it for the loan, then again when withdrawal it when you retire. Remember, all that money is pre-tax...

EVERYONE, PLEASE REMEMBER! YOUR 401(K) SHOULD BE OFF LIMITS!!!!!

[253BK]

I second that!!! BK 5 years retirment 20-30 yrs if lucky

[253BK]

I second that!!!!

[jgarton244]

A loan from your 401K is exactly what you should do. It is not a withdrawal, but a loan. You will pay the laon back with interest to yourself. There is no penalty for taking a loan, as long as it is paid back on the agreed erms of your plan. Since your loan will be the same amount, or less that you were paying for a lease, let's say for example a $15,000 loan/lease. At 7% the payments would be 297.02. You would pay on a five year loan/lease $2821 in interest. With the current stockmarket situation, and being close to retirement, I would assume you are invested in low risk investments which would pay about 4.5% interest in your 401K. If you left the $15,000 in the 401k, at 4.5% over 5 years, you would add $3707 to your 401k balance.

If you borrow from your 401K the $15,000 for a five year loan at 7%, you will pay yourself back the $2821, plus you will make 4.5% on the principle and interest on your loan repayment at 4.5% over the five eyars would add to $2039. Thus your 401K would increase to the $15,000 to $19860. With no 401k loan, you would have $18,707 after 5 years at 4.5% interest on the $15,000. If you obtained a loan say from a bank at 7%, you would pay the bank, not you, the $2821 in interest.

As long as you are comfortable that you will be able to pay the loan back, over the time period alloted, it would make sense to go this route. The caution is if you lose your job, or cannot pay the loan back, if you are under age 59-1/2 you will owe 10% penalty on unpaid amount, plus income taxes on amount not paid.

Let the math speak for itself. Too many comments without any substance to back their statements.

[HHM]

If you borrow from your 401K the $15,000 for a five year loan at 7%, you will pay yourself back the $2821, plus you will make 4.5% on the principle and interest on your loan repayment at 4.5% over the five eyars would add to $2039. Thus your 401K would increase to the $15,000 to $19860. With no 401k loan, you would have $18,707 after 5 years at 4.5% interest on the $15,000. If you obtained a loan say from a bank at 7%, you would pay the bank, not you, the $2821 in interest.

LOL
Or, you could simply SAVE the money that you would use to pay back the 401K. It is that kind of twisted financial logic that has the middle class one step from poverty.

[NASCAR20FAN]

A loan from your 401K is exactly what you should do. It is not a withdrawal, but a loan. You will pay the laon back with interest to yourself. There is no penalty for taking a loan, as long as it is paid back on the agreed erms of your plan. Since your loan will be the same amount, or less that you were paying for a lease, let's say for example a $15,000 loan/lease. At 7% the payments would be 297.02. You would pay on a five year loan/lease $2821 in interest. With the current stockmarket situation, and being close to retirement, I would assume you are invested in low risk investments which would pay about 4.5% interest in your 401K. If you left the $15,000 in the 401k, at 4.5% over 5 years, you would add $3707 to your 401k balance.

If you borrow from your 401K the $15,000 for a five year loan at 7%, you will pay yourself back the $2821, plus you will make 4.5% on the principle and interest on your loan repayment at 4.5% over the five eyars would add to $2039. Thus your 401K would increase to the $15,000 to $19860. With no 401k loan, you would have $18,707 after 5 years at 4.5% interest on the $15,000. If you obtained a loan say from a bank at 7%, you would pay the bank, not you, the $2821 in interest.

As long as you are comfortable that you will be able to pay the loan back, over the time period alloted, it would make sense to go this route. The caution is if you lose your job, or cannot pay the loan back, if you are under age 59-1/2 you will owe 10% penalty on unpaid amount, plus income taxes on amount not paid.

Let the math speak for itself. Too many comments without any substance to back their statements.

But what happens if you get hurt (and cannot work) or fired from your job? I don't know about you, but my job only pays me 60% of my salary if I go onto disablity.

Trust me... I would cut the per pay contributions to the 401(k) (maybe even make it 0) and use that money to do what you need to do. It's better to slow down your retirement savings then to risk them all together.

[woeisme]

What everyone on here saying "no loan from a 401K" and "twisted logic" is disregarding is that fact that the OP needs a car, probably can't get to work without one! And the OP cannot get a loan or car through any other route, they've tried and hit a brick wall. So how exactly does saving their money, not investing as much in their 401K, etc. help them with their immediate problem, the fact that they have no car and no other options for getting a car, and need a car right now? I think it's great that you are giving out the right warnings about the consequences of the 401K loan, so the OP knows what to watch out for, but blanket statements that one should never under any circumstances take such a loan aren't very helpful when someone has their back to the wall and are all out of options.