What do you think my answer is to the above question? Does the screenshot below give you an indication? It better!
I cringe anytime someone asks me this question. Don’t do it. If you need a couple of other options, watch the video or read below.
Whatever you do, don’t use your 401k money to pay off your credit cards.
2 Easy Alternatives
Get a personal loan from your local bank.
You might be asking yourself why you are taking on more debt to pay off old debt. Don’t. Think of it as consolidating and reducing the interest rate on your loan. I recently had a reader that followed my advice and shaved her interest rate by 10%. If you haven’t hurt your credit you can use a balance transfer card and some of the cards will give you airline points for any future purchases.
P2P lending is becoming a mainstay in the financial services industry. The leading peer to peer lender is Lending Club having issued over $1 billion of loans.
Another reader who was currently paying over 25% on her credit cards emailed me asking about cashing in her 401k to pay off her credit cards. (She’s the one that inspired me to film the video). I suggested she check out Lending Club which she did immediately.
A few days later I received this email:
Boom! That’s how you save money and not jeopardize your financial future.
(You can also consider Prosper, another P2P lender.)
If you’ve considered using your 401k to pay off some credit card, explore these alternatives first.