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denim · 07-12-2004, 10:28 AM

A few months ago, I was looking at buying a house. I took out $9000 from my 401k to act as downpayment for the house.

Ended up not buying the house. I've got $8K of the $9K left. I tried sending it to the 401k to pay back the loan, but they won't take anything other than the full remaining amount of the loan. Meanwhile, the loan is being pulled out of my paycheck every two weeks, on a 3 year plan. Terms: 3-year term, 5% over the amount of the loan added to the 401k, plus something like $45/6-months to the maintenance company.

So I'll shortly have the $8K check back in my hands. I figure to either bring it back to the bank and cycle it to my index fund, or pull some money out of the index fund to pay off the remaining amount of the loan.

Why pay the loan? I don't like being in more debt than I have to be. I could just put the money in the index fund, but that's playing with differences in interest rates, where the upshot is that I pay myself 5% more into the 401k than I would have otherwise.

Another reason to pay off the "loan", is caution. If I were to lose my job, I'd have to pay the thing back immediately. I don't like having that potentially hanging over my head.

Meanwhile, I have less money to invest or pay off my plastic which is now up to $3K from things which happened in June.

I want both the plastic and the 401k loan gone, w/o pulling more than I have to out of the index fund. Note that the car loan is not involved in this, as I've already decided to leave it alone. Suggestions?

07-12-2004, 10:28 AM	#1 (permalink)
denim Banned Location: Massachusetts, USA	Money and loans question A few months ago, I was looking at buying a house. I took out $9000 from my 401k to act as downpayment for the house. Ended up not buying the house. I've got $8K of the $9K left. I tried sending it to the 401k to pay back the loan, but they won't take anything other than the full remaining amount of the loan. Meanwhile, the loan is being pulled out of my paycheck every two weeks, on a 3 year plan. Terms: 3-year term, 5% over the amount of the loan added to the 401k, plus something like $45/6-months to the maintenance company. So I'll shortly have the $8K check back in my hands. I figure to either bring it back to the bank and cycle it to my index fund, or pull some money out of the index fund to pay off the remaining amount of the loan. Why pay the loan? I don't like being in more debt than I have to be. I could just put the money in the index fund, but that's playing with differences in interest rates, where the upshot is that I pay myself 5% more into the 401k than I would have otherwise. Another reason to pay off the "loan", is caution. If I were to lose my job, I'd have to pay the thing back immediately. I don't like having that potentially hanging over my head. Meanwhile, I have less money to invest or pay off my plastic which is now up to $3K from things which happened in June. I want both the plastic and the 401k loan gone, w/o pulling more than I have to out of the index fund. Note that the car loan is not involved in this, as I've already decided to leave it alone. Suggestions? Last edited by denim; 07-12-2004 at 10:33 AM..