[rckt321]

Here's the deal, about 3 months ago I took out a loan against my 401K account. I am paying it back at $100 per week and I currently owe $3000 on it. I can afford the $100 per week but it would come in handy to pay off other debts I am paying interest on. With the economy the way it is my 401k account is at a negative 12% rate of return right now so some of that money I am paying back is going into a black hole. I understand that if I don't pay back the loan it will be taxed as income and I will have to pay a 10% ($300) penalty, however at this point it seems that if I use that $100 a week to pay off 15% interest credit cards I would come out ahead. Is my thinking correct on this? Since the loan payment comes right out of my paycheck would an employer typically allow me to stop paying the loan and take it as a distribution?

[CliffARobinson]

The 401k's rules are set by your employer, and you signed a note when you got the loan.

From personal experience, the only options I had were to: (a) Pay in full; (b) Accelerate the amount; or (c) when employment was terminated, pay it back immediately, or default and get the balance (if any) sent to me and take the remaining loan amount as income and receive penalties.