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Discussion Starter #1
Ok, it has come to this. I haven't been able to get a second job yet (I've applied, but gotta wait , ya know), and the medical bills are killing me. My wife suggested that I just take the $2,700 settlement check from the T-bird wreck, get the car back, and use that money to pay off the bills that need it. We discussed, and I pointed out that if she wants to drive it ever again, that I will need that money to actually repair it correctly. So far, that idea is a last resort.

I got my 401K statement from work today, and found out I can get a loan for up to $3,500~ish (50% of my vested balance). I really only need a $1,000 or so to catch up, and maybe be ahead for once. I called the company that handles my 401K, and discussed a loan w/ them, to see what the deal would be.

If I took $1,000 loan right now, I would have $39.80 extra come out of my NET pay (payroll deduct) to pay it back. The intrest is 7.25% right now, and looks to stay there. The loan would be for a year, and equal 26 payments. In the end, I would pay myself back (with the interest added in) $1,138.

I suck at math, and even more at economics, so if any of you have any thoughts on this, please share. I asked my mom for advice, and she just gave me the typical "You need to budget better" shpeal. I already have a budget, and was fine until I ran into the doctor bills and a few other oddities. I know she means well, but I need advice from an indifferent 3rd party, not someone who wants to preach. I am beginning to loose my options to pay this stuff, and this loan would be just the buffer I need to span the time between now, and when I can snag a 2nd job. I can pay the loan back faster if I decide to, so that's not an issue. The only catch is that if I get fired or quit my job, then the full remaining balance of the loan becomes due in 30 days from then.

Please share your thoughts on this, as I am about out of ideas. I really don't want to blow the insurance money that I will get for the bird, but, if that's what it comes down to, then so be it. Family first....

Thanks in advance

Jay
 

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How stable is your current job, ie how good was your last review and how long have you been there?
 

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Discussion Starter #3
Well, I always get great reviews. Never had an issue there. My job is pretty stable I would say, for a telecom job. I've actually got a lot of people on my side there that have helped me along, and I plan on staying for a while. It may not be the best paying job, but some of the benefits I have earned are worth it. I may actually be up for a raise soon, so that may offset the extra $$ that would be coming out of my check each month.

Jay
 

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Well normally I dont suggest taking a loan BUT if you think your job is secure and the $138 is worth your peice of mind then go ahead.
Word of note you may be able to talk with your Dr.s and get some smaller payments worked out (in GA all you have to do is agree pay something and they can't do anything to you). I would suggest this before a loan.
 

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Dont do it

You'll get killed by taxes.

We rtied it a couple of times when we thought we really needed the money and paid up the wazoo on our income taxes.

Best to consult a finacial advisor. May be one at your bank?
 

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I think it would be better to pay the medical bills in payments rather than paying back your 401K and taking the hit on your taxes. So long as you make an honest effort to pay medical bills, they can't and won't do a thing against you legally. Back about 10 or 12 years ago things were tight as hell on me and I had some medical bills to pay off so I sent them $20-$100 a month as I could afford it to pay them off and nothing was said and I had no adverse credit reports. Just food for thought. :D
 

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gzj14v said:
You'll get killed by taxes.

We rtied it a couple of times when we thought we really needed the money and paid up the wazoo on our income taxes.
QUOTE]


Not all case does this affect your income taxes. Only if you default, and dont pay it back does that happen with my company.

I took a loan out last summer for my transmission and as long as I pay the full amount back, and do not leave my position at work; I will have NO TAX PENALTYS.

Check with your 401K and company.

Just my opinion.

Dave
 

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Discussion Starter #8
As Dave stated, my company works the same. As long as I don't default on the loan, then I don't owe anything in taxes, since it's not viewed as "income" unless I default- the state, IRS, or credit agencies will have no knowledge of this loan. I'm basically lending money to myself, and paying myself back w/ intrest. The only downside is that if I do take the loan, until I pay the amount back, I have less money working for me and earning a return. Since I am only 27, I don't see me retiring any time soon, so I don't see why I wouldn't pay it back.

I have worked out a payment plan for the medical bills, but there is more behind the scenes that needs to be delt with besides that, and they aren't as willing to work with me as the med. people are. I'm trying to not have our credit that we've worked so hard to re-build, get destroyed again. I would rather take a small 401K hit now, and save the good credit rating for when I really need a large loan (car, home equity, etc...). Plus, with the money coming right out of my payroll, I really won't miss it, not like a normal loan payment that I would have to mail out every month.

Thanks for the views on this. I think I have a plan....

Jay
 

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ok, 401K loans and YOU..


if you take a loan on your 401k w/your 401k company. you can take up to 50% of the vested amount, you are NOT charged Taxes, and the money you borrow will NOT make any money.. However, Since it is YOUR money, the interest is Paid to yourself!

If you were to get fired, layed off, they will take the balance of the loan, subtract it from your vested amount, and you will then have to pay the tax on the balance of the loan.

edit: (this is the same was what fordman77 last post) so, you got the idea :)
 

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Discussion Starter #10
You are correct, sir. I also have the option to pay it back sooner if I feel so inclined.

Jay
 
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