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Using 401k to clear debt...............


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 4 months ago '04        #1
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qutaboi225  topics gone triple plat - Number 1 spot x6
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Using 401k to clear debt...............
 

 
I got about 40k in my 401k. Already took about 12k out in loans against it to help close on a house i built earlier this year. Company puts in 5% regardless of what i put in. Also, i'll get about a 10k bonus and 7k in stock options check around Feb. 2020

-Long story short, i have about 30-40k in debt/credit cards and my credit is taking a hit paying sh*t late.
-I have about 70-80k equity in the house i just built.

Im thinking about clearing my debt with my 401k and taking the penalty by withdrawing 30k. Been at the company almost 6 years and they contribute 10% when you hit 9. I was gonna up my contribution this year after clearing all my debt to help with putting that money back. After i get in the clear, i could use the equity in my house to invest in a few rental properties next year.


I'm not sure how to get this whole situation under control......image

Would love to get yalls take on how you would handle this.............imageimage
+6   



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 4 months ago '05        #2
Tha Boss  topics gone triple plat - Number 1 spot x1
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Yea I been thinking the same. Interest is low as taking a loan on it but it gives that warning about having xyz less in 30 years. I’m like fuk if I’d rather parlay myself into a better situation now
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 4 months ago '16        #3
Adrian99OVR 
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What's your credit score looking like? Have you looked into personal loans from SoFi, Lending Tree, or a local credit union? What kind of interest rates are you looking at on your credit cards? Have you budgeted? Why not throw that bonus check at your CC with the highest interest rate?

IDK man, for credit card debt I would exhaust my options before I sacrifice my 401k. You might be able to get that balance back up in a few years, but what you could lose in compound interest is no joke.
+3   

 4 months ago '04        #4
qutaboi225  topics gone triple plat - Number 1 spot x6 OP
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 Adrian99OVR said
What's your credit score looking like? Have you looked into personal loans from SoFi, Lending Tree, or a local credit union? What kind of interest rates are you looking at on your credit cards? Have you budgeted? Why not throw that bonus check at your CC with the highest interest rate?

IDK man, for credit card debt I would exhaust my options before I sacrifice my 401k. You might be able to get that balance back up in a few years, but what you could lose in compound interest is no joke.
I kinda fell behind on late payments because of this new lil project i was on at work. So my score went from 804 to about 630ish. Which don't concern me much since i know how to get it back up pretty quick. I was thinking more so if i went into my 401k i could get it all back in less than a year....
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 4 months ago '18        #5
Armstrong 102 
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 Tha Boss said
Yea I been thinking the same. Interest is low as taking a loan on it but it gives that warning about having xyz less in 30 years. I’m like fuk if I’d rather parlay myself into a better situation now
Ya u can’t look 30 years down the line cap ur down the road stuff to 3-5 years. So much policy changes and sh*t 30 years down the line
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 4 months ago '19        #6
crawlingtulip 
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 qutaboi225 said
I kinda fell behind on late payments because of this new lil project i was on at work. So my score went from 804 to about 630ish. Which don't concern me much since i know how to get it back up pretty quick. I was thinking more so if i went into my 401k i could get it all back in less than a year....
Late payments within 24 months hurt your credit the most. Goodwill letters don't work as well as they used to but I would try. I can send you one if you PM me.

As far as your debt how much are the interest rates on the credit cards?

ALWAYS pay your credit card, as long as your income > expenses there is no reason to miss a credit card payment. If you make $500 on a check $500 goes to your credit card and you use the freed up balances to pay your expenses. The credit card company registers that you paid ON TIME and you pay your bills
+4   

 4 months ago '04        #7
x Tha Arkitek x 
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No. I'd recommend against it. $30K+ taken out now is a huge difference in money saved 20 years from now. That money has the potential to grow to $200K+ in that amount of time...and that's without calculating additional contributions & using just an 8% return. So realistically it's even more than that. It'd be a huge setback in retirement.

Cut back on your current monthly expenses, look up the Dave Ramsey Snow Ball debt payment plan, pick up some random on demand jobs to increase your income (Uber, Lyfe, Shipt, Postmates, GrubHub, Waitr, etc.) and tackle that debt through monthly payments.
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 4 months ago '11        #8
TonePadrino 
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You would be better off getting a loan from a credit union to pay off all the accounts you have so you’ll only have 1 monthly payment to make. Then after a year, apply for a credit card with no interest to transfer the rest of the loan.
If you have multiple cards from the same company you can call to merge them. Keep a card that gives you cash back rewards and stop using cash. Leave your 401k alone.
+2   

 4 months ago '11        #9
Kooper  topics gone triple plat - Number 1 spot x1
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Never thought of this.

I owe 9k to Amex
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 4 months ago '05        #10
pnoi89 
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Look into any credit cards such as Chase Slate that offers 0% interest AND $0 balance transfer fees. Use those 15 months to pay off as MUCH of that credit card balance as possible.

If you have enough equity, consider looking into a Home Equity Line of Credit (HELOC), which will offer a much better interest rate as it’s basically using your home as collateral.

If you built enough equity, also consider the option of a cash out, refinance, then use the cash to pay off your debts.

Whatever route you choose, consider all expenses such as closing costs, but whatever you do, get rid of that credit card debt.
+3   

 3 months ago '17        #11
Pacho Herrera  topics gone triple plat - Number 1 spot x1
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 qutaboi225 said
I got about 40k in my 401k. Already took about 12k out in loans against it to help close on a house i built earlier this year. Company puts in 5% regardless of what i put in. Also, i'll get about a 10k bonus and 7k in stock options check around Feb. 2020

-Long story short, i have about 30-40k in debt/credit cards and my credit is taking a hit paying sh*t late.
-I have about 70-80k equity in the house i just built.

Im thinking about clearing my debt with my 401k and taking the penalty by withdrawing 30k. Been at the company almost 6 years and they contribute 10% when you hit 9. I was gonna up my contribution this year after clearing all my debt to help with putting that money back. After i get in the clear, i could use the equity in my house to invest in a few rental properties next year.


I'm not sure how to get this whole situation under control......

Would love to get yalls take on how you would handle this.............
Pay down those cards using whatever means necessary

The interest will k*ll you over time
If you can’t get a loan from your bank to clear them off take out your 401k and start off with a clean slate and start saving up again and stay away from spending on cards

On average your 401k grows at a rate of 3-5%? What is the credit card interest rate? High as fu*k I no that much

Good luck bro
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 3 months ago '04        #12
RETURNOFTHEKING 
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Never borrow out of your retirement. That is your future. Imagine how pissed you’re gonna be when retirement comes and you realized 20 year ago you fu*ked up your current conditions over some credit card bills

Hustle hard and live like a peasant until you pay off those credit cards. And then get rid of them



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 3 months ago '05        #13
pnoi89 
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 RETURNOFTHEKING said
Never borrow out of your retirement. That is your future. Imagine how pissed you’re gonna be when retirement comes and you realized 20 year ago you fu*ked up your current conditions over some credit card bills

Hustle hard and live like a peasant until you pay off those credit cards. And then get rid of them


Dave's advice when it comes to how to handle investments is soooo outdated and backwards, I cringe whenever the topic of investments come up with that guy.

I wouldn't say 'never' borrow out of your retirement, as there are other factors to consider... If it's a 401k with a match, have they fully vested the amount their company matched? What other options are out there to halt the insane credit card interest rates of the debt (HELOC, cash out; refinance, balance transfers for loan consolidation, etc.)?
+2   

 3 months ago '04        #14
RETURNOFTHEKING 
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 pnoi89 said
Dave's advice when it comes to how to handle investments is soooo outdated and backwards, I cringe whenever the topic of investments come up with that guy.

I wouldn't say 'never' borrow out of your retirement, as there are other factors to consider... If it's a 401k with a match, have they fully vested the amount their company matched? What other options are out there to halt the insane credit card interest rates of the debt (HELOC, cash out; refinance, balance transfers for loan consolidation, etc.)?
I hear ya about Dave. I’m not a Ramsey Truther but I believe he has the right idea to get financially uneducated people out of debt. Not saying that about OP, but wanted to get it out there

I just see no reason to pay the government 30%-40% for your money. I also don’t totally agree with retirement funds that lock your money away from you. But that’s for another day

OP has other options with the equity in his home, but at some point, the behavior of borrow here and there and everywhere to pay something else needs to cease in order to accumulate wealth.
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 3 months ago '09        #15
TriniSoldier 
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your main gig aint cutting it if you constantly late on payments so get a second job n*gga and just grind it out
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 3 months ago '04        #16
Ace2125 
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First of all why are you in debt? The problem isn't the credit cards it seems like its your spending. I don't think its financially intelligent to use investment to pay off debt.
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 3 months ago '07        #17
RedMonkeyJunkie 
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Depending on your 401K plan, you can borrow against it, usually they let you take half of your total amount at a 3-6 interest rate loan, and won’t hurt your actual investments, and is probably the lowest rate loan you’d be able to get.

 3 months ago '05        #18
pnoi89 
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 RedMonkeyJunkie said
Depending on your 401K plan, you can borrow against it, usually they let you take half of your total amount at a 3-6 interest rate loan, and won’t hurt your actual investments, and is probably the lowest rate loan you’d be able to get.
Rates have dropped, so he can leverage his home with a HELOC or a installment loan for <6%.

He can also “cash out; refinance” while obtaining a good interest rate for his mortgage.

 3 months ago '19        #19
Cowboy 
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Use the equity bro and just start from a new slate. Trust me. If you are that much in cc debt then it wasn’t time to get into real estate...


What’s your cash reserves look like?
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 3 months ago '18        #20
niruggg 
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 qutaboi225 said
I kinda fell behind on late payments because of this new lil project i was on at work. So my score went from 804 to about 630ish. Which don't concern me much since i know how to get it back up pretty quick. I was thinking more so if i went into my 401k i could get it all back in less than a year....
I think the credit union loan is best low interest and you get away from the credit card company would go into the 401k you already touched that stop fu*king wit it

 3 months ago '18        #21
niruggg 
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 RedMonkeyJunkie said
Depending on your 401K plan, you can borrow against it, usually they let you take half of your total amount at a 3-6 interest rate loan, and won’t hurt your actual investments, and is probably the lowest rate loan you’d be able to get.
borrowing your own money, and paying interest on it? fu*k outta here

 3 months ago '19        #22
crawlingtulip 
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 qutaboi225 said
I got about 40k in my 401k. Already took about 12k out in loans against it to help close on a house i built earlier this year. Company puts in 5% regardless of what i put in. Also, i'll get about a 10k bonus and 7k in stock options check around Feb. 2020

-Long story short, i have about 30-40k in debt/credit cards and my credit is taking a hit paying sh*t late.
-I have about 70-80k equity in the house i just built.

Im thinking about clearing my debt with my 401k and taking the penalty by withdrawing 30k. Been at the company almost 6 years and they contribute 10% when you hit 9. I was gonna up my contribution this year after clearing all my debt to help with putting that money back. After i get in the clear, i could use the equity in my house to invest in a few rental properties next year.


I'm not sure how to get this whole situation under control......

Would love to get yalls take on how you would handle this.............
What’s the update?
-1   

 3 months ago '07        #23
kyhoopsgoat 
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I took $70K out of my 401K to pay off my mortgage. I am now debt free after finishing off my student loans earlier this week. Feels good man.

$1,600/month raise now and can put this extra money somewhere else.

+2   

 3 months ago '04        #24
qutaboi225  topics gone triple plat - Number 1 spot x6 OP
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 crawlingtulip said
What’s the update?
They won't let me go into my 401K unless i'm in a dire situation i.e bankruptcy, foreclosure, terminated. My bonus and stock option check is about 1 month away to the tune of about 25k-30k. I'll use that to just pay my debt down.
+1   

 3 months ago '04        #25
qutaboi225  topics gone triple plat - Number 1 spot x6 OP
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 kyhoopsgoat said
I took $70K out of my 401K to pay off my mortgage. I am now debt free after finishing off my student loans earlier this week. Feels good man.

$1,600/month raise now and can put this extra money somewhere else.

They told me that i could only withdraw that much if im in foreclosure, terminated, or ill etc. I guess different companies got different rules.



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