"Science is the great antidote to the poison of enthusiasm and superstition."Adam Smith
|
| |
Getting A Handle On Your Bills With A Debt Consolidation Loan
If you find yourself overwhelmed in debt, or are considering applying for a mortgage but your debt to income ratio is too high, it may be time to consider a debt consolidation loan. Qualified mortgage companies, such as http://www.NorthstarFinance.us, ...
Repairing Your Credit
Repairing credit scores cannot be deemed an easy task, but also cannot be considered an impossible task, either. Many individuals have less than ideal credit scores due to a number of factors. It can be due to a job loss, where bills fell behind due to ...
Seven Ways to Consolidate Your Debt
When it comes to debt consolidation the first thing you want to do is consolidate your debt, but the first thing you should consider are all of your options. There are in fact more options and help out there than you imagined and just because you are in ...
|
|
|
| |
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.
Usually the participant is allowed to borrow up to 50% of their vested account balance to a maximum of $50,000 (set by law). Because of the cost, many plans will also set a minimum amount and restrict the number of loans any participant may have outstanding at any one time.
Loan payments are generally be deducted from payroll checks and, if the participant is married, they may need their spouse's to consent to the loan.
Funds obtains from a loan are not subject to income tax or the 10% early withdrawal penalty. If the participant should terminate employment, often any unpaid loan will be distributed to them as income. The amount will then be subject to income tax and may also be subject to 10% withdrawal penalty. A loan can't be rollover into an IRA.
There are generally four reasons given to avoid 401k loans if possible:
* Lower investment return. According to the General Accounting Office, the interest rate you pay yourself on your plan loan is often less than the rate your plan funds would have otherwise earned, and you lose the benefits of compound interest.
* Smaller contributions. Because you now have a loan payment, you may be tempted to reduce the amount you are contributing to the plan and thus reduce your long-term balance.
* If you quit working or change jobs, you must pay back the loan right away. It's not uncommon for plans to require full repayment of a loan within 60 days of termination of employment. If you don't repay, the loan is considered defaulted, and you are taxed on the outstanding balance, including excise taxes in many cases.
* Repayment of principal and interest is made with after-tax dollars. By contrast, a home equity loan from a bank is often structured so that the interest you pay is tax-deductible. On a larger loan, this could add up to significant savings.
Go to www.401khelpcenter.com for more information on this and other 401k issues.
About the Author Mr. Meigs is the founder and President of 401khelpcenter.com, LLC a three-year-old Internet Company based in Portland, Oregon. It is a leading provider of information, opinion, analysis, news, rules, and other 401k resources for plan sponsors, small businesses, and employees.
Written By: Rick Meigs, Publisher, 401khelpcenter.com
|
|
|
|
|
|
 Fitch cuts GMAC rating to "Restricted Default" - MSN MoneyCentral
NEW YORK (AP) - Fitch Ratings said Thursday it downgraded its issuer default rating for GMAC LLC to "Restricted Default" from "CCC," citing the recent completion of the financing company's bond exchange. The exchange covered about $28.8 billion of ...
Press looking to interview readers who used home-equity loans - Asbury Park Press
Did you refinance or get a home-equity loan during the real estate boom to keep pace with the cost of living? If so, we'd like to talk to you for an upcoming story. Please contact Michael L. Diamond at (732) 643-4038 or mdiamond@app.com . Standard ...
Here's what to do if your home-equity line is slashed - Marketwatch
WASHINGTON (MarketWatch) -- Question: I had my line of credit cut in half and am having a very difficult time getting it reinstated. My facts are as follows: Appraised value at time the line was issued was $1.2 million, first mortgage of $960,000 (80 ...
Moody’s Downgrades BofA, Lifts Merrill - CFO.com
The debt ratings of Bank of America Corp. and its subsidiaries were lowered by Moody's Investors Service. However, Moody's also raised to BoA's levels the ratings of Merrill Lynch, which BofA officially acquired on Jan. 1. The rating agency cut BofA ...
Consumer Borrowing Falls By $7.94B In November - KDKA
Consumers cut back on their borrowing by a record amount in dollar terms in November, another sign of trouble for the rapidly weakening economy. The Federal Reserve reported Thursday that borrowing on credit cards, and for such things as auto loans ...
US consumer borrowing falls - Straits Times
WASHINGTON - AMERICANS cut back on their borrowing by a record amount in dollar terms in November, another sign of trouble for the rapidly weakening economy. The Federal Reserve reported Thursday that borrowing on credit cards, and for such things as ...
U.S. reverse mortgages rising but some view warily - Reuters
WASHINGTON, Jan 8 (Reuters) - The market for reverse mortgages, which allow older Americans to borrow against their homes while living in them, is growing fast but advocates for aging Americans say they should only be used in specific instances ...
Mortgage rates hit record low again - Inside Bay Area
WASHINGTON — Rates on 30-year mortgages fell to a record level for a fourth straight week, dropping to the lowest mark since Freddie Mac started tracking the data nearly 28 years ago. Rates have been falling since late November, when the Federal ...
Consumer borrowing fell more-than-expected in November - Axcess News
(AXcess News) Houston - U.S. consumers, worried about the direction of the economy and their own lives, cutback on borrowing in November more-than-expected. In fact, consumer borrowing in November reached a record low of $7.9 billion. Considering ...
US gov't sends Chrysler $4B bridge loan - Ann Arbor News
AUBURN HILLS, Mich. (AP) — Chrysler LLC and the U.S. Treasury Department said Friday that the government had supplied the automaker with a $4 billion loan that was necessary to keep it operating. Chrysler Chief Executive Bob Nardelli said in a ...
|
