DarmokTheNinja t1_j6nxt7g wrote on January 31, 2023 at 5:52 PM

Why not just get a used car loan? You can pay it off in like two months.

But sure, do something stupid with your 401k instead.

MachoGarage t1_j6nyf2w wrote on January 31, 2023 at 5:55 PM

It's a private party sale, which I could get a personal loan for at probably 10% interest and hit my credit report, whereas with the 401k loan I am paying myself the interest and the loan does not affect my credit

userpart2 t1_j6o01u4 wrote on January 31, 2023 at 6:05 PM

10% on 7k for 30 days is about $58. There is little interest to be paid to yourself or a bank.

CrazySteeeveee t1_j6o14q0 wrote on January 31, 2023 at 6:12 PM

Find a credit union near you, should be able to get that rate down below 7%. Not sure why youre concerned w credit score unless youre swallowed in debt while stll pocketing 150k. Even at 10%, the interest is minimal over 2/3 months and sounds like it'll be worth a couple hundres more $ to secure your dream car

Liquidretro t1_j6o0dzp wrote on January 31, 2023 at 6:08 PM

Depending on the age of the car you can still likely get a car loan for a private party sale. Have you actually applied or talked to a banker about a personal loan? The credit hit is minor and doesn't matter if you are not planning on using credit in the next few months.

I dislike 401k loans in general as you are taking money out of the market, and depending on the plan rules may need to stop contribution, might not be able to pay off early, you would have to pay it all off should you be fired or leave before it's paid off, etc. It's also just bad practice to think of that 401k as a place to go get money from when in need. This is a want, not a need, not an emergency.

This is the type of thing savings are for especially when you can replenish in such a short time frame.

[deleted] OP t1_j6od517 wrote on January 31, 2023 at 7:26 PM

[removed]

AutoModerator t1_j6nxg1x wrote on January 31, 2023 at 5:50 PM

You may find these links helpful:

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

CrazySteeeveee t1_j6ny9km wrote on January 31, 2023 at 5:54 PM

If you clear, the price of the car, every month. I dont see the need to pull from 401k. Save for a month or 2. Pulling from 401k has a bunch of steps and conditions. Pulling from your savings doesn't, especially when you can replace within 2 months

MachoGarage t1_j6nyny5 wrote on January 31, 2023 at 5:57 PM

I should have clarified its a private party sale of a very in demand "classic" 90s vehicle which should not last more than a couple weeks for sale, which is why I can't rely on saving a few months

DarmokTheNinja t1_j6nyyqj wrote on January 31, 2023 at 5:59 PM

How do you not have $15k in an emergency fund? Hell, I have that available and I make a small fraction of what you do.

MachoGarage t1_j6nz8qd wrote on January 31, 2023 at 6:00 PM

I would not pull from my emergency fund for what's ultimately a toy. Should I have the same view of my 401k?

ReddSaidFredd t1_j6o05k7 wrote on January 31, 2023 at 6:06 PM

Yes you should.

DarmokTheNinja t1_j6o39er wrote on January 31, 2023 at 6:25 PM

You refresh the emergency fund in like two months. This should be easy math.

DaemonTargaryen2024 t1_j6oddkq wrote on January 31, 2023 at 7:27 PM

>would it be unwise to take a loan for 7k of money I've set aside for retirement?

Yes it is.

Taking a 401k loan means the funds are out of the market until repaid, so hurts your growth and plan balance over the long run.

Short term, in the unlikely event you lose your job, the entire loan could become due immediately, and would be taxable + 10% penalty if not paid. And since a loan has no withholding when originally taken, that's a possibly large tax bill.

401ks also have strict rules about loan eligibility: you can only take max 50% of your balance up to $50k, with a 12 month look-back rule on that limit. So if you took a loan now and then had a truly dire emergency, you'd be possibly unable to take another loan at that time.

Upset-North-2211 t1_j6of4n9 wrote on January 31, 2023 at 7:38 PM

You are 25, make lots of money, have fun and buy the toy. In your case I would use the emergency fund, but repay it in 2 months or less by sacrificing fun stuff in your budget. If you do have an emergency in those 2 months you can always borrow from the 401k.

Establishing discipline regarding retirement funds will greatly help in your future. Also the fact that you are actually thinking about toy purchases and their negative consequences at 25, bodes well for your financial future.

[deleted] OP t1_j6oyxub wrote on January 31, 2023 at 9:40 PM