Loan with 401k as collateral?

[Tim W.]

I'm looking for additional funds to finish repairs/rehab costs. I've opened a HELOC, done a cashout refinance, and opened a business credit line for the LLC already. I'm trying to be creative and find extra funds if we potentially need them. I'm a Southern California resident. I've heard of loans that use retirement accounts as collateral. I have a 401k, does anyone know of a lender who does this? Does it pose an issue that the funds borrowed are against a retirement account (are there any extra penalties or fees associated with this type of loan)? Any help/advice would appreciated. Thanks, Tim

[Christopher Phillips]

@Tim W.

No. That's not allowed for 401K nor for an IRA. IRS would treat it as if you did a full disbursement of your retirement fund.

You can receive a plan loan or a withdrawal (with tax and penalties depending on the reason).