Ask Experts Questions for FREE Help !
Ask
    Birchwood's Avatar
    Birchwood Posts: 1, Reputation: 1
    New Member
     
    #1

    Dec 29, 2006, 09:35 PM
    401K Loan vs. Home Equity Loan
    I need $50,000 for a kitchen remodel.

    I can get a 401K loan 5 yr term 9.25 interest - total payments add up to 62,000 or so with a monthly payment of roughly $1,050. That payment is is tough on my current budget so I was considering a Home Equity Loan with a longer term.

    I know there are a lot of Home Equity Products on the market. I found one from ING that is 8.25%, 25 year term, interest only for the first 10, no early payment penalty. I know it is a dangerous loan but has great flexibility. I could possibly pay $700 a month (more than the minimum interest only payment) making the budget less of a concern. The problem is I am paying ING the interest instead of myself with the 401k loan.

    I am not concerned about losing my job. So I am not worried about being stuck with any 10% 401k penalties and additional tax.

    So, the question is, what do I do? Should I do a blend part 401k loan and also take out a home equity loan?

    Not sure, would love to have your thoughts.

    Thanks.
    Fr_Chuck's Avatar
    Fr_Chuck Posts: 81,305, Reputation: 7692
    Expert
     
    #2

    Dec 29, 2006, 09:54 PM
    I would say you don't need a kitchen remodel, you want one and can't really afford one.

    What about this, you put that 1000 dollars a month into a savings account for the next 4 years and then you decide if you want to spend that money in cash for the project.

    I believe that if you are going to push your budget, it is spending too much money.

    I beleivev putting your home more at risk in losing it, is extremely dangerous.
    CaptainForest's Avatar
    CaptainForest Posts: 3,645, Reputation: 393
    Ultra Member
     
    #3

    Dec 29, 2006, 11:04 PM
    I agree with Fr Chuck's plan of action.

    I doubt you can really afford it right now. Save the money for the next 4 years and THEN get it.

    Not only will you be able to afford it, but it will feel much better as well.
    klattu's Avatar
    klattu Posts: 3, Reputation: 1
    New Member
     
    #4

    Aug 11, 2011, 08:38 AM
    Great advice... lets tell Washington this too !
    "you want one and can't really afford one"

Not your question? Ask your question View similar questions

 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Loan against 401K [ 1 Answers ]

My 401K is still with :confused: my employer for one year and a day after my resignation. How can I obtain a small loan (3K). The year is almost up but I need the cash now!:confused:

401k home loan default [ 3 Answers ]

My wife took out a loan two years ago from her 401k. This was a first time withdrawal for the purpose of a home loan. She is now interviewing with another company. (Better commute, new faces) Given that her loan becomes callable when she leaves, if she defaults, is there the 10% withdrawal...

Get rid of home equity or car loan? [ 5 Answers ]

My cousin's dilemma. They have a $14,000 home equity loan at 7.25% apr, a car loan on a 7 yr old car for $9500 at 5.99% apr and $90000 in savings at 3-4% interest rate. They are currently having a baby and have short-term goals of starting a business so they don't want to get rid of too much...


View more questions Search