Hitting the 401K

There can sometimes be an air of panic that sets in when you can see your credit card bills begin to spiral out of
control. if you are experiencing the sensation for the first time of being trapped by credit, you may turn to a second mortgage.

The danger of this is if the credit card debt continues to increase, as they are designed to do, you may suddenly findyou have put your home on the line and could be in danger if you default on those bills.

Even if you are in need of cash for hospital bills there are some great medical loans to pay medical bills

This is when Important decisions need to be made as the sheer amount of the debt drains your last remaining resources to try to fight decision is whether it would be a good idea to cash in your retirement money or borrow on your 401K to get enough money to try to bring down your debt levels. 

So deciding whether this is a sensible idea is a huge gamble as if you win, you could eliminate debt entirely.
But if you lose,you lose your protection for your senior years and maybe the little nest egg you wanted to
give to the kids as an inheritance.

Hitting the 401K to pay off your credit card debt is a bad idea for numerous reasons.

Even if you have bad credit there is a small business loan for you to start up your business to make 401K. Shop around as there are a number of great deals to be had. 

The most obvious reason is that your retirement money is tax deferred so when you put it into that account, you didn’t pay any taxes on it. You don’t have to pay taxes on it until you take it out. On top of that,
the money is intended to stay in reserve until you hit retirement age so in a lot of circumstances, if you take it out early, there is a big penalty that you may be liable to pay.

So, if you cash out your retirement funds to pay down or pay off your credit card debt, you may lose a lot of money to penalties and taxes. You might want to calculate how much that penalty is going to be
compared to the interest you might save because it’s a big pay off just to get to those funds.

The prevailing logic of hitting the 401k is that in theory you will save more money from the interest than you would make from the investment. But there is some solid logic for leaving those retirement funds exactly where they are. For example, debt will come and go but retirement funds have a tendency to going away and never coming back.

Once you cash out those retirement funds and give the money over to credit card debt, your retirement is gone. But if you find ways to take care of that credit card debt and leave your retirement alone, it is there for you and you have that sense of ownership that the debt has not taken everything from you.

One possible alterative is to borrow against your 401K and use it as collateral. Now in this case you are still just swapping debt for debt. However secured debt is often quicker to get a favorable interest rate and you can
cap it so the rate doesn’t float around like credit card debt.

Once you have started your business up and it is making some decent money you may think about a self employed mortgage. There are various self employed mortgages on the market today for you to choose.

So there is some rational for going that route.
But if that is an option, you are still putting a very essential part of your financial future on the line so be very careful.