401k loan thiskodam manchike ayindi antunna desi uncles

[hyperbole]

3 hours ago, coffeeabhi said:

You can take upto 50% or 50k, whichever is lower, of your 401k balance with the current employer as loan. No questions are asked, no papework is required. You can use that money for buying anything or even to just gamble, they dont care. 

Every month, you have to pay the EMIs on the loan. Both the principal and interest components are added back to your 401k account. 

They charge some minimal processing fee to start the loan, thats the only fees that we lose.

Lets say your 401k balance is 100k and each share that you hold in your account is $100. So, you have 1000 units of that fund/share. If you take 50k loan, they will sell 500 units and give you the money. Now, with the money that you pay monthly, they will buy those units back.

If the unit price is 100 when you started your loan, they sold 1 unit at 100. At the time of monthly payments, if the unit value goes down to 50, they will buy 2 units for the same 100 and add them back to your account. So, if the stock goes down during your loan, you will have more units. If the stock goes up, you will have less units at the end of the loan.

Yes It is 50% and max up to 50k. No they don’t sell anything in your account, your 401k is held as a collateral and hence the 50% requirement. Loan and 401k are seperate, in case you withdraw your 401k, they will hold the loan balance and reimburse the remaining.

documentation Adgutaru, I went through that process twice with one rejection as the loan is only applicable on the first house and the loan will be rejected if you are buying second home

[chingchang]

3 hours ago, megadheera said:

Recession lo gaacharam Gand maari job pothe 401k loan immediate ga clear cheyali..if he doesn’t pay they will treat it as early withdrawal. Appudu 10% penalty and tax. Doola teerudhi

Depends on employer. Some employers will give you an option to pay with same frequency even if you resign or lose your job. 

[hyperbole]

1 hour ago, Bendapudi_english said:

Motham wrong information isthunav ga anna

👇

5 minutes ago, hyperbole said:

It is 50% and max up to 50k. No they don’t sell anything in your account, your 401k is held as a collateral and hence the 50% requirement. Loan and 401k are seperate, in case you withdraw your 401k, they will hold the loan balance and reimburse the remaining.

documentation Adgutaru, I went through that process twice(rejected once) and the loan is only applicable on the first house and the loan will be rejected if you are buying second home

 

[chingchang]

5 minutes ago, hyperbole said:

It is 50% and max up to 50k. No they don’t sell anything in your account, your 401k is held as a collateral and hence the 50% requirement. Loan and 401k are seperate, in case you withdraw your 401k, they will hold the loan balance and reimburse the remaining.

documentation Adgutaru, I went through that process and the loan is only applicable on the first house and the loan will be rejected if you are buying second home

Yup. Or you can take as personal loan. They won’t ask you any questions for personal loan. Only difference is personal loan is 5 year term vs home loan 10 years. 

[hyperbole]

13 minutes ago, chingchang said:

Yup. Or you can take as personal loan. They won’t ask you any questions for personal loan. Only difference is personal loan is 5 year term vs home loan 10 years. 

There is no concept of a personal loan with 401k, it is a privilege that your employer offers you as part of the 401k plan and it is uncommon for a lot of folks. loans towards house purchase can been prolonged as long as 25 years.

That’s why in order to get a loan you will need to employed with employer offering 401k.

Also if you leave jobs with an outstanding 401(k) loan have until the tax-return-filing due date for that tax year, including any extensions, to repay the outstanding balance of the loan, or to roll it over into another eligible retirement account. If you can’t repay it, the amount of money you still owe may be considered a “deemed distribution” and could be taxed as it would be if you were to default on the loan.

[JackSeal]

1 minute ago, hyperbole said:

There is no concept of a personal loan with 401k, it is a privilege that your employer offers you as part of the 401k plan. loans towards house purchase as been prolonged as long as 25 years

You can take personal loan using 401k… personal loan will have shorter term compared to home loan … interest for personal loan used to be 1.5% when I took and no fees… that interest will also go to your 401k when you payoff 

[hyperbole]

8 minutes ago, JackSeal said:

You can take personal loan using 401k… personal loan will have shorter term compared to home loan … interest for personal loan used to be 1.5% when I took and no fees… that interest will also go to your 401k when you payoff 

It is a privilege offered by your employer, some employers offer it but a lot won’t. IRS has some guidelines for loans - primary home, medical, education for family etc.

 

Allowing loans within a 401k plan is allowed by law, but an employer is not required to do so. Many small business just can't afford the high cost of adding this feature to their plan. Even so, loans are a feature of most 401k plans. If offered, an employer must adhere to some very strict and detailed guidelines on making and administering them.

The statutes governing plan loans place no specific restrictions on what the need or use will be for loans, except that the loans must be reasonably available to all participants. But an employer can restrict the reasons for loans. Many only allow them for the following reasons: (1) to pay education expenses for yourself, spouse, or child; (2) to prevent eviction from your home; (3) to pay un-reimbursed medical expenses; or (4) to buy a first-time residence. The loan must be paid back over five years, although this can be extended for a home purchase.

[JackSeal]

Just now, hyperbole said:

It is an employer privilege, some employers offer it but a lot won’t. IRS has some guidelines for loans - primary home, medical, education for family etc.

They won’t give you a personal loan if you say I want to go on a vacation or invest in stocks or home improvements etc

Allowing loans within a 401k plan is allowed by law, but an employer is not required to do so. Many small business just can't afford the high cost of adding this feature to their plan. Even so, loans are a feature of most 401k plans. If offered, an employer must adhere to some very strict and detailed guidelines on making and administering them.

The statutes governing plan loans place no specific restrictions on what the need or use will be for loans, except that the loans must be reasonably available to all participants. But an employer can restrict the reasons for loans. Many only allow them for the following reasons: (1) to pay education expenses for yourself, spouse, or child; (2) to prevent eviction from your home; (3) to pay un-reimbursed medical expenses; or (4) to buy a first-time residence. The loan must be paid back over five years, although this can be extended for a home purchase.

Our 401k is managed by fidelity. We can take personal loan upto 50% of vested amount (maximum 50k). No questions asked and no documentation required. At a time you can have maximum two personal loans. They sell units you hold and fund your loan. When you repay they will buy back at current price. They ask documentation for hardship withdrawal or due to other natural disasters.

[Ravi860]

15 minutes ago, JackSeal said:

Our 401k is managed by fidelity. We can take personal loan upto 50% of vested amount (maximum 50k). No questions asked and no documentation required. At a time you can have maximum two personal loans. They sell units you hold and fund your loan. When you repay they will buy back at current price. They ask documentation for hardship withdrawal or due to other natural disasters.

what if someone already have loan can they still do hardship withdrawl?

[hyperbole]

17 minutes ago, JackSeal said:

Our 401k is managed by fidelity. We can take personal loan upto 50% of vested amount (maximum 50k). No questions asked and no documentation required. At a time you can have maximum two personal loans. They sell units you hold and fund your loan. When you repay they will buy back at current price. They ask documentation for hardship withdrawal or due to other natural disasters.

Adi mee employer cheyali man, I also have 401k through fidelity but not offered personal loans as mine is a startup, employers with deep pockets will do it as a good will gesture as an agreement to fund the loan with fidelity, companies with with limited cash flow won’t offer that option.

fidelity will not offer any loan if you quit your employer, in order to get a loan on your current 401k it is mandatory for you to be employed by your employer.

[JackSeal]

3 minutes ago, Ravi860 said:

what if someone already have loan can they still do hardship withdrawl?

Can take hardship withdrawal if you have bandwidth after loan

[JackSeal]

7 minutes ago, hyperbole said:

Adi mee employer cheyali man, I also have 401k through fidelity but not offered personal loans as mine is a startup, employers with deep pockets will do it as a good will gesture as an agreement to fund the loan with fidelity, companies with with limited cash flow won’t offer that option.

fidelity will not offer any loan if you quit your employer, in order to get a loan on your current 401k it is mandatory for you to be employed by your employer.

Could be employer to employer plan difference … but fidelity sells your holding to fund personal loan so no  employer approval needed … if you leave the company you need to pay back the amount to 401k within 90days else it will be treated as withdrawl 

[Bendapudi_english]

2 hours ago, hyperbole said:

There is no concept of a personal loan with 401k, it is a privilege that your employer offers you as part of the 401k plan and it is uncommon for a lot of folks. loans towards house purchase can been prolonged as long as 25 years.

That’s why in order to get a loan you will need to employed with employer offering 401k.

Also if you leave jobs with an outstanding 401(k) loan have until the tax-return-filing due date for that tax year, including any extensions, to repay the outstanding balance of the loan, or to roll it over into another eligible retirement account. If you can’t repay it, the amount of money you still owe may be considered a “deemed distribution” and could be taxed as it would be if you were to default on the loan.

Nenu thisukuna anna personal loan from 401k up to 20%, no questions asked 

[hyperbole]

37 minutes ago, Bendapudi_english said:

Nenu thisukuna anna personal loan from 401k up to 20%, no questions asked 

As I said it is employer dependent, not all employers offer that

• Every employer's plan has different rules for 401(k) withdrawals and loans, so find out what your plan allows.
• https://www.fidelity.com/viewpoints/financial-basics/taking-money-from-401k

In my fidelity 401k I am allowed to trade like normal broker account buy or sel any stock but at former companies only index funds are allowed

[Variety_Pullayya]

problem is that these generally have a very good earning record. sometime they grow by 12-18 % . so if you take a loan you might miss on the growth . instead you will payback with marginal loan %.

now might be bad time as stocks are down. if you take out loan now and miss the growth when economy bounces back.