other 401K talk, throwing it here.
401K loans seem smart in the following situations:
1) you've got a steady job with little risk of termination before the end of the payback period.
2) you've got an existing loan you can use to pay it off.
3) you think the US is entering a phase when there won't be a ton of growth of your 401K.
I think all three are true now. I've got a 5.75% loan on a car for $45k. I'm thinking of just paying it off with a 401K loan. i get all the interest instead of the lender. i'm not missing out on growth of that money right now. doing the math, it looks like i'm giving up about $200 a month interest right now while watching the $45 k that would fund the loan shrink in my 401K.
The big downside to a 401K loan generally is that you are refilling your 401K, which was funded with pre-tax dollars, with post-tax dollars. But that is why you only use it for number 2 above: you would be paying off some existing loan off with post tax dollars, of course. So you're having to use post tax dollars on one or the other -- either to pay the lender or to pay you.
I don't expect the 20% growth rates we've had for the last couple of years to continue, so I think this is a good time to use that money elsewhere.