Is 401K Loan Considered Debt?
21750 POINTSview profileJim WinklerCEO/Owner, Winkler Financial Group, Houston, TexasThat is a great question! The answer is simple. Anything that you borrow, and must repay, is considered to be debt. In the cases where you borrow from yourself, (401K loans, life insurance loans, etc.) it's easy to think that it isn't really debt, but consider what happens if you don't pay it back. If you were to lose your job, your 401k debt becomes immediately due in full. Your life insurance loan, if not repaid, can eventually cause the policy to lapse, and eventually cancel. A good financial rule is if you borrow it, it's a debt, and needs to be repaid. I hope that helps,thanks for asking!Answered on June 9, 2014flag this answer
10968 POINTSview profileTim WilhoitOwner, Your Friend 4 Life, Brentwood TNBorrowing against a 401k is both a yes and no answer as to debt. No it is not traditional debt as showing against your credit score or debt to earnings ratio, because you are borrowing your own money. It is debt as Jim mentioned, because it must be repaid within 9 months. The tax and penalty consequences are much worse than borrowing the money from a lender. It is never advised to borrow from your 401k because you are borrowing from your own future. A simple rule is if you need money today while you are able to earn an income, you will need money when you are old and sick and can't earn an income.Answered on June 9, 2014flag this answer
37376 POINTSview profileDavid G. Pipes, CLU®, RICP®Business Development Officer, T.D. McNeil Insurance Services, Fresno, CaliforniaWhen you borrow from your 401(k) the amount of the loan will be deducted from any distribution from the plan along with any interest that was charged. You might be forced to take a distribution from you 401(k) at a time that you didn’t anticipate, such as the loss of employment, illness of spouse or relative or your own poor health. There are tax issues that should be discussed with a tax professional.Answered on December 17, 2014flag this answer
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