smart: I have 8,500 in credit card debt and about 15,000 or more in my 401k. I'd like to know if it would be a smart idea to take a loan against my 401k to pay off my credit card debt, that way there would only be one payment and it would be much lower. I'd also like to mention that i'm only 24 and won't be retiring any time soon.Is it smart to borrow against your 401k to pay off credit card debt?If your job is secure, and your credit card interest rates are higher than your average 401(k) earnings, this probably is a smart move. Interest on 401(k) loans usually is lower than most credit card interest. Also, the interest you pay on a loan against your 401(k) goes back into the 401(k), so you鈥檙e actually paying yourself while consolidating your credit card debt. And paying your cards off may even increase your credit score a bit. Be careful, though, not to fall into the trap of running up major new balances on those cards you鈥檝e just paid off. Then you鈥檇 be in worse shape than you were before you took out the loan on your 401(k). Good luck!!|||No, it is never smart to borrow against a 401K. If you borrow against a 401K and then your employment ends (regardless of whether it was your fault or not) and you cannot immediately repay the entire loan, then it becomes a taxable distribution subject to regular federal income tax (often 25% or more), state income tax (usually 0-10%), and a 10% penalty at your age, for a total tax and penalty of 1/3 to 1/2 of the amount of the loan.Is it smart to borrow against your 401k to pay off credit card debt?This is a question of debated with myself, but for a down payment for a home loan. If the interest on the credit cards are sky high, then it would be a good idea. Think of it this way - by paying them, you are making whatever the percentage rate of the credit card is on the money you took from the 401k. Be careful, though! Make sure you can pay back your 401k. The taxes can be pretty terrible for withdrawing early!|||That depends entirely on your interest rates on the cards and whether you can keep from spending on those cards again. Hubby and I recently borrowed from the 401k to pay our credit cards. They were all jacking up the rates for no reason at all (to 29.99% one!!) due to upcoming changes in the law.. they want to get as much money as possible while they can, apparently. We did the right thing because I did the math and we won't be putting balances on those cards again.Is it smart to borrow against your 401k to pay off credit card debt?No it isn't. Credit card debt can be discharged through bankruptcy if worse comes to worse. You lose your job, and you have to pay back the loan on your 401K right away. Since this is a bad economy, no job is really safe. Look for other options to get rid of your credit card debt.|||If they interest rate is higher than 15%....then it may be a good idea. If you do this, be sure to ask for a voluntary credit limit reduction to $500 for each card....otherwise it will simply be too tempting to start using all the available credit again.|||No, it is not smart.|||No, it is not smart. If you are laid off or change jobs, the loan must be paid back immediately or it is viewed as a distribution for tax purposes. It that happens you will owe 10% of the amount to the IRS as a penalty and the amount will be added to your AGI for the year and you will owe income taxes on that money, both state and Federal. It comes out to about 40% in taxes and penalties. Your age (if you are under age 59 1/2) really doesn't matter. What does matter is that you start to make some smart choices about your money now so that you can be rich later. First you need to stop spending money that you don't have. Please do not consolidate or use a debt reduction company . It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. Student loans are the only debt that can garnish your wages for non payment without taking you to court first. Just list them out on a piece of paper or a spreadsheet and follow the plan. If you work the plan, the plan will work for you. A. Have a garage sale and sell anything that you no longer need or want. B.Get a temporary part time job, if you have one, get another. The wife too. When my kids were small, I worked at night to bring in extra money so that I would still be there for them during the day. Here is a plan that can help you. If you work the plan, the plan will work for you: 1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make. 2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on. 3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example: To start : Debt #1 (highest interest): minimum payment+ extra payment Debt #2 (middle interest): minimum payment Debt #3(lowest interest): minimum payment Debt #1: paid off Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment Debt #3: minimum payment Debt #1: paid off Debt #2: paid off Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment. That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have. 4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty. 5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life. 5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire. 5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest. You can do it and it isn't as hard as you think. Just follow the plan.