There is a big downside to taking out fully a 401k loan that no one covers: fees. While you have a loan; losing out on the growth your loan money would have enjoyed if it had stayed in the 401k account; and if you lose your job (quit, change jobs, get fired) while you have a loan outstanding, the remaining loan balance is typically due within 60 days if you read an article about the pros and cons of 401k loans, the usual list of cons includes: not being able to make contributions to the plan.
Those are typical good reasons why you should think before using away a loan that is 401k. Nevertheless the reason that is biggest to actually avoid these loans, if possible, could be the income tax treatment. You do so with after-tax dollars when you repay your 401k loan. Understand that normal efforts to a 401k were created with pre-tax bucks, that is among the major advantages of playing a 401k plan. Read More