Smart people: can I use a 401k as collateral on a loan?

[Jerk]

Thanks!

[StoopTroup]

No problem.

http://weblogs.newsday.com/entertainment/tv/blog/tony_soprano.jpg

[Frozen Sooner]

As a general rule, retirement funds are exempt from creditors, and as such cannot be used as collateral on a loan. In the case of a 401(k), the financial institution that houses the 401(k) only may offer a loan against the balance of the 401(k). Such loans are typically limited to 1/2 of the cash value of the 401(k) and are payable on demand if the employee leaves employment with the sponsoring company. On the bright side, the loan is treated as an investment of the 401(k), so the interest paid on the debt is return on the 401(k).

[Jerk]

As a general rule, retirement funds are exempt from creditors, and as such cannot be used as collateral on a loan. In the case of a 401(k), the financial institution that houses the 401(k) only may offer a loan against the balance of the 401(k). Such loans are typically limited to 1/2 of the cash value of the 401(k) and are payable on demand if the employee leaves employment with the sponsoring company. On the bright side, the loan is treated as an investment of the 401(k), so the interest paid on the debt is return on the 401(k).

That sux.

Thanks mike.

[JohnnyMack]

Nope.

Tried it with my last mortgage.

[mdklatt]

On the bright side, the loan is treated as an investment of the 401(k), so the interest paid on the debt is return on the 401(k).

Which means that you're loaning yourself the money and paying yourself the interest, right? Win-win!

[Widescreen]

Yes, but there are supposedly downsides. I'm not sure what they all are but I assume you're going to be paying yourself less return than you would get by leaving it in the fund. But I could be wrong.

[Frozen Sooner]

Well, look at it this way:

If it's money you'd borrow anyhow, if you didn't borrow it from the 401(k) you'd be paying someone else the interest. And your 401(k) may crater.

[olevetonahill]

My Friend Vinny will Loan you Money
No Collateral
You jus keep up the Vig every fri. :cool:

[Jerk]

My Friend Vinny will Loan you Money
No Collateral
You jus keep up the Vig every fri. :cool:


I'd be less afraid of them, than some hillbilly from SE Oklahoma.

[olevetonahill]

I'd be less afraid of them, than some hillbilly from SE Oklahoma.

who you think Collects the Vig :cool: