PFBlog logo

Consumerism Commentary

Striving for personal financial security.
  Channel Home | Automobile (10) | Benefits (1) | Bills and Coins (3) | Blogs (2) | Budget (1) | Carnival (3) | Charity (4) | Children (2) | Commercials (1) | Consumerism (11) | Credit (8) | Credit Cards (5) | Deals (4) | Debt (1) | Economy (15) | Education (7) | Expenses (7) | Financial Advisors (2) | Flexo Style (23) | Food (2) | Frugal (4) | Fun (1) | Gas (3) | Gurus (2) | Inflation (2) | Internet (10) | Investing (39) | Loans (2) | Millionaires (7) | News (4) | Other (4) | People (2) | Publications (3) | Real Estate (21) | Retirement (12) | Saving (25) | Shopping (6) | Society (3) | Sports (1) | Taxes (4) | Vacation (1) | Website (3) | Working (36) | Contact Me

More on 401(k) Borrowing

March 30, 2005 07:08 AM PST

Following up on the topic of 401(k) loans, which was discussed here, there is a new article on CNN Money by Walter Updegrave.

This article compares a scenario for two options: borrowing $40,000 through a 401(k) loan and borrowing the same amount through a home equity line of credit. Assuming the two options are available to an individual in need, one comes out better when exercising the home equity line option.

Here's their calculation:

Borrow from 401(k) Borrow from Home Equity Line
$40,000 4-year loan $40,000 4-year loan
Monthly payment $934

 Monthly payment $926
$100,000  Beginning 401(k) balance $100,000  Beginning 401(k) balance
-  40,000  Loan  
$  60,000  401(k) balance after loan  
+  15,749  Earnings on 401(k)
                 at 6% annual return		 +  26,248  Earnings on 401(k)
                 at 6% annual return
+  44,832  Loan repayment (48 X $934)  
+   5,773  Earnings on monthly loan payments
                 at 6% annual return		  
$126,354  Ending 401(k) Balance $126,248  Ending 401(k) Balance
  +       384  Savings from lower loan payments
                  ($926 vs. $934)
+    1,112  Tax savings on home
                  equity loan interest
$126,354  Final 401(k) balance $127,744  Final 401(k) balance
                  plus other savings
Source: CNN/Money

View and add comments.mortgage calculator

What do you think of this post? Be the first to share your opinions.
Similar Posts

401(k) Getting Whacked By The Market? (April 18, 2005)
I'm sitting in a suite at the Renaissance Esmerelda in Indian Wells, California, not far from Palm Springs. It's great to get away from reality for a few days, especially when family is covering the bill. I'll be heading back to the Orange County area ... Read
Friendly IRA Reminder (April 13, 2005)
The deadline for funding IRAs for 2004 is coming up at the end of the week. If you haven't maxed out your 2004 Roth IRA at $3,000 ($3,500 for anyone over 50 years old) then you have less than 72 hours to do so. Read
Should You Borrow From Your 401(k)? (March 23, 2005)
Borrowing from your 401(k) is generally a bad idea. There are some positive aspects of doing so, however. It's a nice option to have if you are stuck with no other choices. Read

Read all 12 articles in the same category.
Comments

Mail This Post
Email addresses will never be collected or sold.
Email this entry to:

Your email address:

Message (optional):

PREMIUM SPONSORS

Low Home Equity Rates!
Health Insurance
Life Insurance Canada
Adjustable Rate Mortgage
Credit Cards
Car Insurance
Personal Loans
0% Balance Transfers
Bad Credit Personal Loans
HELOC Ideas
Universal Life Insurance
American Life Insurance
Canadian Life Insurance
Credit Cards

  your ad here ...



Google
Web PFBlog

WHAT I READ

WSJ
CBS MarketWatch
CNN Money
NY Times: Business
SmartMoney
Kiplinger
Morningstar
The Motley Fool

Saving Advice
Consumerism
    Commentary
It's Your Money
AllThingsFinancial

POWERED BY

Join the world's largest Web Host! Movable Type 2.64