Who gets the interest from a 401k loan?

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Lavonne Bayer asked a question: Who gets the interest from a 401k loan?
Asked By: Lavonne Bayer
Date created: Fri, Mar 5, 2021 6:39 PM
Date updated: Mon, Aug 29, 2022 2:31 AM

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Video answer: 401k loans explained

401k loans explained

Top best answers to the question «Who gets the interest from a 401k loan»

  • The interest rate is the same regardless of your credit score, which is one reason why so many people find 401 (k) loans tempting. According to the Investment Company Institute (ICI), 19% of people eligible for 401 (k) loans have loans outstanding. In this case, you’re paying interest to yourself, not to a bank or your employer.

Video answer: 401k loans: what you need to know

401k loans: what you need to know

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You will pay yourself interest. The interest rate on your 401 (k) loan is determined by the rules in your 401 (k) plan, but it is typically set up as a formula (for example, the prime rate + 1%.) Although you pay the interest back to yourself, taking a 401 (k) loan hurts your future retirement savings most of the time. 4  2 

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