Tapping a 401K
Ok, it has come to this. I haven't been able to get a second job yet (I've applied, but gotta wait , ya know), and the medical bills are killing me. My wife suggested that I just take the $2,700 settlement check from the T-bird wreck, get the car back, and use that money to pay off the bills that need it. We discussed, and I pointed out that if she wants to drive it ever again, that I will need that money to actually repair it correctly. So far, that idea is a last resort.
I got my 401K statement from work today, and found out I can get a loan for up to $3,500~ish (50% of my vested balance). I really only need a $1,000 or so to catch up, and maybe be ahead for once. I called the company that handles my 401K, and discussed a loan w/ them, to see what the deal would be.
If I took $1,000 loan right now, I would have $39.80 extra come out of my NET pay (payroll deduct) to pay it back. The intrest is 7.25% right now, and looks to stay there. The loan would be for a year, and equal 26 payments. In the end, I would pay myself back (with the interest added in) $1,138.
I suck at math, and even more at economics, so if any of you have any thoughts on this, please share. I asked my mom for advice, and she just gave me the typical "You need to budget better" shpeal. I already have a budget, and was fine until I ran into the doctor bills and a few other oddities. I know she means well, but I need advice from an indifferent 3rd party, not someone who wants to preach. I am beginning to loose my options to pay this stuff, and this loan would be just the buffer I need to span the time between now, and when I can snag a 2nd job. I can pay the loan back faster if I decide to, so that's not an issue. The only catch is that if I get fired or quit my job, then the full remaining balance of the loan becomes due in 30 days from then.
Please share your thoughts on this, as I am about out of ideas. I really don't want to blow the insurance money that I will get for the bird, but, if that's what it comes down to, then so be it. Family first....
Thanks in advance
These are highly engineered precision vehicles, the first step in diagnosing the problem is to strike the suspected offending part sharply and repeatedly with a blunt object, then re-test.