the danger of a 401k loan

[Scott W.]

I'm sure it's been discussed before but I'd like to tell something I see (correct if I'm wrong):

a 401k loan should be among the last resorts for borrowing. reason being is you pay it back AFTER taxes.  if you live in Illinois and are in the 25% federal bracket, that's 29%! and it's EVERY time you take a loan.

I did a home equity line of credit at 4% last year. I get to deduct it so the cost of the $ is around 3%?  A TON cheaper than the 401k loan.  a 401k loan is almost the equivalent of a hard $ loan.

oh, and you don't get to deduct the cost of paying those taxes back on your real estate investment.

IMO, a lot of people don't have a clue about their true cost of borrowing for this vehicle. it's not mentioned on the internet very much either.

there's a guy I know who is an underwriter for a bank and doesn't know about this; I feel bad for people who don't see the true cost of this.

search for private loans, bank loans before this. and make sure you know how much of a hit you will take. for a $50k 401k loan, that's almost $15k you eat!

if I'm wrong, please correct me!