What Is The Interest Rate On A 401k Loan
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When facing a financial challenge, one funding option many people overlook is borrowing from their retirement account. A 401(k) loan is a way to tap into your own retirement savings to cover short-term expenses. But before using this strategy, it’s important to ask: What is the interest rate on a 401(k) loan, and how does it compare to other borrowing methods? Understanding the interest rate, loan terms, and potential risks will help you make an informed decision. Understanding 401(k) Loans A 401(k) loan allows you to borrow from your own retirement account. Unlike a traditional loan from a bank or credit union, you’re not borrowing from a lender you’re borrowing from yourself. This means the repayment process and interest work differently from other loans. To access a 401(k) loan, your retirement plan must allow loans. Most plans do, but not all. You’ll need to check with your HR department or plan administrator for specific rules and limits. What Is the Interest Rate on a 401(k...