I am purchasing a new home and I had some questions about what I should do. I have the cash to close but I would also like to get rid of my truck payment as well. I could take a loan from my 401 to pay off my truck and use my savings to pay for closing. The thought behind this is I am paying myself interest with the 401k loan vs paying the bank the interest. Any thoughts?
I would never take a loan out of 401K personally and for the following reasons:
1. It is meant for purely retirement and nothing else, so wouldn't want to pull a loan out of it for a truck.
2. 401K money is invested in mutual funds as you might be aware and gives you a potential to grow your money.
3. If you move out of your current job for any reason, you will have an obligation to repay the loan back or pay penalty. I do not even know the process in such situation.
Hope that helps. Some people might be comfortable doing that but I would not be willing do it, if you ask my honest opinion.