Home Equity Loan vs. 401(K) Loan –Which should you choose?Written by Charles Essmeier
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If you have a diversified 401(K) account, you will probably be earning interest on your retirement money. In fact, interest rate you are earning on your retirement fund may exceed interest rate you would pay for a home equity loan. In that case, you take out a home equity loan, leave retirement money where it is, and you should earn a net gain between two. If your retirement fund is earning good interest, and in late 1990's many were earning upwards of 20% per year, then borrowing on your principal could hurt you tremendously in long run. Due to nature of compounding, amount you lose by borrowing from your retirement account could be far more than simply sum of loan amount plus interest. The interest on a home equity loan is tax deductible, up to $100,000. The interest on a 401(K) loan is not.
There are certainly some circumstances where you might benefit from borrowing from retirement funds instead of taking out a second mortgage, but those situations are fairly rare. A substantially higher interest rate on home equity loan than 401(K) loan would be one such example. If in doubt, you should consult with a financial planner.
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing. Established in 1978, Retro Marketing is a firm devoted to informational Websites, including http://www.HomeEquityHelp.net/ and http://www.End-Your-Debt.com/
| | Why use a loan calculator?Written by Jakob Jelling
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Or you can use your monthly earnings to determine via a loan calculator house you can afford without overheating your household budget. A great advantage of loan calculators is to compare loan offers. A loan calculator can make job of comparing two or more loans to find best deals. Loan calculators can also be helpful when consolidating or refinancing your debt. You can compare your current loan with new loan offers and decide if you will be saving enough to make transition to a new loan. A loan calculator can also help you see how much you will have to pay in interest and principal payments each month. Thus you can establish a monthly repayment amount that is best for you, where you are paying off principal as well as interest. A loan calculator can help you setting up your household budget and savings plan for coming years.
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.
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