Borrowing Money From Your 401k
That this subject which we will talk about a very important topic because it will promote your Read this issue
When you invest in a 401k you never expect to need access to the money before the plan matures completely but the economic downturn of recent years has lots of people struggling to pay even their most basic bills. There is hope for these people in the form of a 401k loan. 401k loans are provided in the majority of 401k plans and this provision offers quick access to much needed funds. Current employees who participate in a 401k plan can actually take a loan from the money invested within their personal plan. For those individuals who haven't set up an emergency fund or have no available monies the 401k loan is a solution that, when done correctly will make all the difference in the world. However, if done incorrectly the loan can have detrimental effects.
Each 401k plan varies and it is important to know exactly what type of plan you have and what the restrictions and limitations are for securing a 401k loan. The majority of plans require a minimum amount to be borrowed from, often times being between $500 to $1000. For those needing more funds and have more money vested up to 50% can be borrowed against; typical plans allow borrowing up to $50,000. Remember that all plans are different, some plans allow you to borrow against the company match contributions whereas other 401k plans do not.
While each plan may set their own specific loan features and restrictions there are a number of similarities. Even so, if you are considering a loan, be sure to check with your plan provider to see what the requirements are for you. As with any loan, the 401k loan has a set repayment term, generally being 5 years for a personal loan and up to 15 years if the loan is used to purchase a home. Since the loan is off of your 401k, loan payment installments will come directly from your paycheck, usually in equal installments, until the 401k loan is paid off. The great thing about getting a loan off your 401k is that the interest rate is typically set at the prime rate plus 1% and will be a fixed rate through the life of your loan.
A 401k loan may be the perfect solution to those needing quick money. There isn't that much paperwork that needs to be filed, you don't have to worry about being approved as you would a bank loan, and the interest rate is paid back into your 401k so you are really paying the interest to yourself! There are some drawbacks to a 401k loan, there are sometimes additional fees to get the loan started, yearly maintenance fees, and fees if you fail to make a payment. Most companies have someone who handles their 401k plans and can answer any questions you may have and can explain exactly what type of 401k plan you have and how to initiate a 401k loan.
When I needed access to money after a car accident I went to the bank and after 3 hours of paperwork and answering questions I was finally denied the loan. At home I was speaking with my wife's sister who told me about borrowing from 401k. I have spent the last 10 years or so investing in my current companies 401k and I had no idea I could get a 401k loan. I filed the 3 sheets of paperwork and had the loan in about 3 days. I probably saved almost $1,000 in interest I would have paid a bank.
Article Source: http://EzineArticles.com/?expert=Andrew_Massaro
Article Source: http://EzineArticles.com/6473631
That this subject which we will talk about a very important topic because it will promote your Read this issue
When you invest in a 401k you never expect to need access to the money before the plan matures completely but the economic downturn of recent years has lots of people struggling to pay even their most basic bills. There is hope for these people in the form of a 401k loan. 401k loans are provided in the majority of 401k plans and this provision offers quick access to much needed funds. Current employees who participate in a 401k plan can actually take a loan from the money invested within their personal plan. For those individuals who haven't set up an emergency fund or have no available monies the 401k loan is a solution that, when done correctly will make all the difference in the world. However, if done incorrectly the loan can have detrimental effects.
Each 401k plan varies and it is important to know exactly what type of plan you have and what the restrictions and limitations are for securing a 401k loan. The majority of plans require a minimum amount to be borrowed from, often times being between $500 to $1000. For those needing more funds and have more money vested up to 50% can be borrowed against; typical plans allow borrowing up to $50,000. Remember that all plans are different, some plans allow you to borrow against the company match contributions whereas other 401k plans do not.
While each plan may set their own specific loan features and restrictions there are a number of similarities. Even so, if you are considering a loan, be sure to check with your plan provider to see what the requirements are for you. As with any loan, the 401k loan has a set repayment term, generally being 5 years for a personal loan and up to 15 years if the loan is used to purchase a home. Since the loan is off of your 401k, loan payment installments will come directly from your paycheck, usually in equal installments, until the 401k loan is paid off. The great thing about getting a loan off your 401k is that the interest rate is typically set at the prime rate plus 1% and will be a fixed rate through the life of your loan.
A 401k loan may be the perfect solution to those needing quick money. There isn't that much paperwork that needs to be filed, you don't have to worry about being approved as you would a bank loan, and the interest rate is paid back into your 401k so you are really paying the interest to yourself! There are some drawbacks to a 401k loan, there are sometimes additional fees to get the loan started, yearly maintenance fees, and fees if you fail to make a payment. Most companies have someone who handles their 401k plans and can answer any questions you may have and can explain exactly what type of 401k plan you have and how to initiate a 401k loan.
When I needed access to money after a car accident I went to the bank and after 3 hours of paperwork and answering questions I was finally denied the loan. At home I was speaking with my wife's sister who told me about borrowing from 401k. I have spent the last 10 years or so investing in my current companies 401k and I had no idea I could get a 401k loan. I filed the 3 sheets of paperwork and had the loan in about 3 days. I probably saved almost $1,000 in interest I would have paid a bank.
Article Source: http://EzineArticles.com/?expert=Andrew_Massaro
Article Source: http://EzineArticles.com/6473631
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